On a nominal basis, the United Kingdom is set to see a 19.3% increase in house prices from now until the end of 2019. Different regions will experience massively different increases. Fortunately, every region will remain positive for all five years, with one exception- London, which looks to plateau in 2015 as home-buyers become disenchanted with the extreme property market of the capital.
Over the next five years the report estimates that London will report the lowest growth in total (at only 10.4%) including no growth in 2015. Considering that house prices rocketed by 15% in 2014 alone, this proves how inconsistent and risky the capital’s market can be.
Conversely, the North promises a steady 14.3% growth over the coming years. The three regions that make up the area (North West, North East, and Yorkshire and Humber) may not be predicted the absolute largest increases throughout the country, but they remain crucially stable and free from outside influence.
Whereas the regions which Savills predict to do best- East of England and South East, are largely benefitting from the ripple effect. London’s house prices have risen so dramatically, that people have had to move further afield and commute, but in another five years when the London market begins to gain momentum again, those masses will probably chose to move back to the city, leaving the East and South East.
The biggest reason behind such a large increase in this house prices forecast is the lack of stock. The report by Savills is far from the only one to note the lack of construction in the property sector. They explain how, “The real challenge in housing is still to find genuinely new, imaginative and additional ways of delivering good homes in great neighbourhoods, for prices most people can afford”.
Unfortunately, this is a challenge which is not being fully embraced. The report claims that the ideal number of new homes England needs is 240,000-245,000 per year. However, looking at the twelve months preceding March 2014, only 112,000 were built, under half the recommended amount. Worryingly this 112,000 is actually a positive increase of 4.5% on the previous year.
The lack of available housing to buy means more and more people are choosing to rent properties. Savills predict that in England and Wales alone, the number of private rented households will rise by a massive 1.2million, meaning 24% of households in the UK will be in this sector. On the other hand, the number of people owning their own households will see a decrease of 202,000.
The generation most affected by this shift to renting is the under 35. Savills predicts that, even in such a short period of five years’ time, two out of three under thirty-five year olds will be renting. This 66% is in direct contrast to the 16% who own their own homes. Overall, the new generation represents a change in perspective. The hassle and cost of mortgages associated with traditional houses are no longer seen as worth it. The renting sector, on the other hand, offers attractive flexibility and no extreme payments which can often seem intimidating in such a fluctuating market.