London house prices are set to see minimal growth compared to the Midlands, North of England and Scotland, according to Savills’ five-year residential forecast.
The traditional north-south divide will be reversed, with increased growth in northern regions, as London and the South struggle against affordability constraints.
The annual report predicts a decline of 2% on house prices in the capital in 2019, with a five-year forecasted growth of just 4.5%, compared with hikes of 21.6% in the North West, 20.5% in Yorkshire & Humberside, and 19.3% in the East Midlands, West Midlands and Wales.
Savills anticipates that UK house prices will increase by 1.5% in 2019, and by 14.8% between 2019 and 2023.
Brexit will continue to influence sentiment in London and the commuter belt, but market affordability will have the largest effect on house price growth.
Lucian Cook, Savills head of research, said: “Brexit angst is a major factor for market sentiment right now, particularly in London, but it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.
“That legacy will limit house price growth, but it should also protect the market from a correction.”
London’s prime market will perform more strongly, reaping the benefit of price adjustments since 2014, and is also less dependent on mortgage borrowing. Savills expects 12.4% growth in prime central London by the end of 2023.
The Midlands, the North of England, Yorkshire and the Humberside, Scotland and Wales – areas with greater borrowing capacity relative to income – will see price growth between 17.6% to 21.5% in five years.
Savills pointed to key regional economies, such as metros of Manchester and Birmingham, actively attracting local and investor buyers, with the potential to outperform their regions.
The annual forecast is in strong contrast to JLL’s predictions, released earlier this week, which predict a rebound of prices in London compared with relatively low growth in the North.
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