The housing market in the UK is set to see steady and stable growth in the next five to 10 years rather than a boom or bust, marking a major change, according to a new analysis. Average price growth of 2.5% per annum is forecast as the market is likely to be still adjusting to varying levels of political and legislative change, says the report from real estate firm JLL.
It explains that a range of factors are colluding to deliver more moderate UK house price growth over the next five to 10 years. However, and despite the intrusion of Brexit, the outcome will be a more stable and healthy UK housing market, it concludes.
JLL describes the change as ‘structural’ and says it might take some getting used to but in the end it will be good for Government, the economy, buyers, sellers and industry participants and lay the foundations for a less volatile UK housing market in the medium term. It also says that Brexit will not get in the way of a more stable and healthy UK housing market which will be free from ‘great capital boosts’. The report also forecasts that sales will slow, averaging 1.23 million per annum over the next five years and housing starts are set to remain buoyant averaging 206,000 per annum over the next five years.
The lettings market will be a little more robust, according to the forecast, but rental growth will still be more muted than usual at 2% per annum in 2018 and 2019. But it also says that the rental market will continue to expand, both because of continued unaffordability in the sales market but also supported by the growing trend of renting by choice. It suggests rents will rise steadily by around 2.5% per annum from 2020 to 2022.
The Greater London market, which has been more subdued lately, will change too with affordability being the overriding influence in terms of prices and sales, the report suggests. The report says that house price growth will be stronger outside of the less affordable London and South East regions.
Overseas property investors are expected to play a lesser role going forward in the London property market as stamp duty and income tax changes impact on their potential returns. But JLL says that a strong economy, especially post-2019, will drive housing demand and push up prices.
In central London the market it likely to be steady with the firm forecasting that demand for new developments will remain muted over the next two years until the Brexit deal becomes clearer. A bedrock of demand will continue from domestic owner occupiers supported by a steady stream of international buyers and investors.
It is also forecasting that activity in the prime central London market will be subdued for the next two years with continued pressure on pricing especially at the top end of the market where stamp duty impacts are greatest. Muted house price growth across all London markets is forecast during 2018 and 2019 and although activity should pick up from 2020 as the Brexit impact settles, the forecasts are more modest than in previous years.
