JLL predicts subdued growth for UK house prices, with a stronger rebound in London, in its annual UK residential housing forecast.
Its residential forecast, Find the Gap, predicts house price growth of just 0.5% in 2019, a considerable downgrade on its prediction of 2% growth in last year’s report.
The forecast predicts growth of 1%, 3%, 3.5% and 3%, in 2020, 2021, 2022 and 2023, respectively, equating to cumulative growth of 11.4% over the five-year period.
Greater gains will be seen in London, with a growth rate of 14.8% in Greater London, highs of 17.6% in central London developments, and 15.3% in prime central London in the same period.
JLL predicts muted investor interest and slow growth for the country, in line with economic performance. It assumes a deal will be achieved as the UK exits the EU, with a transition period until 2020.
This will drive a steady recovery with GDP growth rising to 2% within the next five years, enabling gradual improvements in house prices, transactions and delivery between 2019 and 2023.
The forecast states: “JLL sees every reason to expect a hard couple of years for the industry.” It adds that high costs to builders and buyers, and low house price or income rises, will continue to stifle the market in the short term, and constrain transactions and housing starts.
But from 2021 growth and activity will accelerate, especially in London and the South East, according to the forecast.
Regional house price trends
The report notes the decline in development starts in Greater London, with Q3 2018 figures dropping to the lowest level since 2012.
Poor affordability, stamp duty charges and Sadiq Khan’s affordable housing requirements have hampered growth in London, says JLL. The investment market has slowed over the past three years, both in terms of domestic and international finance. But, despite the announcement of consultation on additional surcharges for overseas buyers, the London tax regime is still preferable to other global cities, and post-Brexit the capital is expected to bounce back.
A strengthened sterling after Brexit and London’s Help to Buy scheme, which has been extended to 2023, will continue to boost housebuilder activity in the short-term, says JLL.
The forecast says that the current overhang of available units may thwart price growth in the near future, but as supply slows prices could grow as much as 5% pa by 2021.
In contrast to double-digit price growth from 2019-2023, growth will reach only of 6.6% in the North East and 8.2% in Wales.
JLL residential research director Adam Challis said the UK was in “the eye of Brexit” and he called on investors and developers to “spot the opportunity” as the market creeps onwards with moderate, yet steady growth and pockets of potential in the growth of BTR, emerging sub-sectors such as retirement and the potential to control land values.
In the coming years, as the market recovers, ambitious targets from empowered public bodies after Philip Hammond’s recent cash injections, major infrastructure projects, digital construction and connected technologies will enable sustained growth in the housing market, Challis said.
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