House prices will rise just one per cent on average next year a new report by property firm JLL suggests – and values in prime London are set to fall.
It adds that the Golden Age of booming property prices is unlikely to ever be repeated again and says homeowners should expect average annual increases of 2.5 per cent between now and 2022, far lower than the 20-year rolling average of 6.9 per cent.
JLL describes the Golden Age for Britain’s homeowners as between the 1980s and the 2008 financial crisis, as house prices marched ‘ever upwards in both nominal and real terms.’
Worst performer: Property prices in the capital are expected to be way below the national average between now and 2022
It adds: ‘The market has recovered, but pre-crash growth trends are unlikely to be repeated.
‘To understand the outlook, a long perspective is required to identify the historic tailwinds for UK housing and why they may not provide the same momentum in future.’
The data suggests that between 2018 and 2022, prime central London house prices will see the slowest growth of 8.7 per cent.
Additionally, central London developments will see growth of 9.8 per cent and Greater London 11.4 per cent – below the expected UK average of 12.6 per cent.
Other regions expected to not beat the UK average are the North, with growth of 9.3 per cent and the South East, Scotland and Wales, with prices heading up 10.4 per cent in each.
Forecasts were made taking into consideration factors including expectations for the strength of the economy over the period, the most-likely impact of Brexit on the housing market and predictions for the impact of tax changes and slowing population growth.
The report predicted that ‘the UK economic outlook is reasonably steady but below GDP growth for the next two years followed by robust but unspectacular expansion during a three-year transition period’.
Bigger picture: House prices are expected to rise the most in percentage terms in the North West between now and 2022
Neil Chegwidden, in the residential research team at JLL, said: ‘A range of factors are colluding to deliver more moderate UK house price growth over the next five to ten years.
‘However, and despite the intrusion of Brexit, we believe this transition will provide a more stable and healthy UK housing market.
‘This new housing paradigm should be embraced and welcomed.
‘It is good for government, the economy, buyers, sellers and industry participants. But it will also take some getting used to.
‘House price growth averaging 2.5 per cent per annum for the next five years will not excite investors or homeowners, but will lay the foundations for a less volatile UK housing market in the medium-term.’
Steady: JLL estimates that house price growth will be far more steady in the coming years
The region predicted to have the biggest property price increases is the North West according to JLL.
Prices are expected to rise three per cent next year – and overall by 16.5 per cent by 2022. In the West Midland and Yorkshire & the Humber, prices are forecast to rise 14.2 per cent.
Overall, house values are expected to rise one per cent next year, with prime central London witnessing a fall of one per cent and central London developments, Greater London and the South East seeing no growth.
The forecast from JLL comes a day before Savills releases its five-year forecast and ahead of the Bank of England rate rise decision.
Tough: Property prices are not expected to grow in and around London next year
Additionally today, Nationwide Building Society published its monthly index, which showed values were up 0.2 per cent in October while annual growth accelerated to 2.5 per cent, with the average home now priced at £211,085.
Robert Gardner, Nationwide’s chief economist said: ‘Low mortgage rates and healthy rates of employment growth are providing some support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence.
‘The lack of homes on the market is providing support to house prices.’
The JLL report predicts that the number of new homes being built in the capital will remain at around 25,000 a year until 2022.
This less than half the 66,000 target rumoured to be set by mayor Sadiq Khan later this month.
Tony Pidgley, chairman of the Berkeley Group – London’s biggest housebuilder – said: ‘If we really want to build homes for all Londoners, the private and the public sectors have got to collaborate. There is a solution if we all work together.
‘The reality is that most development in London involves complex, brownfield land which requires a huge amount of time, expertise and capital.
‘Housebuilding is painfully slow, not because of build out rates or a skills shortage but because of the uncertainty and division.
‘The Berkeley Group alone has land without planning permission that could deliver 20,000 more homes. If we work in a spirit of cooperation, these derelict sites can be turned into communities.’
Overall: The average annual growth in the last 20 years has been 6.9% – but it will be more like 2.5% between now and 2022
The JLL report concludes: ‘The housing paradigm shift will create a new list of winners and losers. In the meantime, houses will remain unaffordable for too many and insufficient in number for most.
‘As ever, the most successful businesses reflect the needs of their customers and for housing it couldn’t be a more important time to grasp the nettle.’