House prices in the London and Prime Central London markets will continue to grow over the next five years, according to the latest analysis from CBRE.
Jennet Siebrits, head of residential research at CBRE, said that while price growth reached a low point in London in August 2015, it had picked up by the end of the year.
“The shortage of stock is keeping a floor under prices, while the number of homes on estate agent books is at an historic low,” she said.
“It is expected that the top of the market will be more subdued in the run-up to the EU referendum, but there is relatively robust demand at the middle to lower end, largely from domestic buyers, and the new 40% deposit Help To Buy will boost domestic buyers in the outer zones.”
A number of concerns have emerged around pricing in the central London development market.
MAINSTREAM HOUSE PRICE GROWTH 2016-2020 (%) Source: CBRE
| 2016 | 2017 | 2018 | 2019 | 2020 | Total | |
|---|---|---|---|---|---|---|
| LONDON | 5 | 3 | 5 | 6 | 6 | 26 |
| PRIME CENTRAL LONDON | 3 | 4 | 6 | 6 | 6 | 25 |
| SOUTH WEST | 4 | 4 | 5 | 6 | 6 | 25 |
| SOUTH EAST | 5 | 4 | 4 | 5 | 5 | 23 |
| EAST MIDLANDS | 4 | 3 | 4 | 4 | 4 | 19 |
| WEST MIDLANDS | 4 | 3 | 4 | 4 | 4 | 19 |
| EAST ANGLIA | 3 | 3 | 4 | 4 | 4 | 18 |
| WALES | 4 | 3 | 3 | 4 | 4 | 18 |
| NORTH EAST | 3 | 3 | 4 | 4 | 4 | 18 |
| NORTH WEST | 2 | 3 | 4 | 4 | 4 | 17 |
| SCOTLAND | 2 | 3 | 3 | 4 | 4 | 16 |
| YORKSHIRE & HUMBERSIDE | 2 | 2 | 3 | 4 | 4 | 15 |
| UK | 3 | 3 | 4 | 5 | 5 | 20 |
JLL downgraded its central London residential development growth forecasts earlier this month, saying it expected to see the value of new-build developments decline by 3% in 2016, as opposed to a 1% increase.
Last week, the RICS said a net balance of 17% of respondents expected an increase in sales over the coming three months.
CBRE said that in London, supply remained a fundamental problem, which had led to the highest absorption rate of new builds in recent years, with 67% of units under construction already sold off plan.
It also said that the recent trend of domestic owner-occupiers buying off plan could counteract the effects of reduced buy-to-let sales, though reduction in homes could have a knock-on effect on housing supply, further acting in favour of rising housing prices.
The agent said that any drop-off in buy-to-let activity is likely to be absorbed by pent up demand from first-time buyers.
A survey by the Residential Landlords Association said 34% of landlords could invest elsewhere, which suggests a 12.3% fall in buy-to-let sales volumes.
However, CBRE says there have been 2.3m fewer first-time buyers over the last 10 years.
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