The house price forecast: how much will your London home be worth by 2022?

House prices in the North of England are expected to outperform London and the South East over the next five years, according to the most recent price forecast from leading property experts.
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Struggling would-be London home buyers should get some breathing room over the next three years, but a price bump is expected in the medium to long term.

Further interest rate rises, following November's 0.25 per cent increase to the Bank of England base rate, are expected to challenge buyer affordability in parts of the country where prices have raced ahead of incomes.

BREXIT UNCERTAINTY TO CAUSE SHORT-TERM LULL

House prices in London rose 70 per cent in the past decade, more than three times faster than in the UK as a whole, pushing the average house price to £479,000 in 2017, according to Savills, which carried out the research.

This is 12.9 times the average income, with first-time buyers in the capital paying an average deposit just shy of £100,000, almost four times the UK average.

Unsurprisingly, average and even many high-earning Londoners now struggle to afford to buy homes. As a result house-price growth is expected to be hardest hit in the capital.

Savills anticipates prices will fall 1.5 per cent in 2017 and a further two per cent in 2018, before stagnating in 2019 due to continuing uncertainty surrounding Brexit.

However, the forecast says £33,000 should still be added to house prices in the capital over the next five years, with a five per cent boost anticipated in 2020, the year after Britain officially exits the EU, provided employment, wages and GDP grow as expected.

That will put the average London house price at just over half a million pounds by 2022.

House price forecast over the next five years

Region                 Average price 2017 Average price (forecast) 2022 Five-year price increase
North West £156,000 £184,000 18.1%
North East £127,000 £149,000 17.6%
Yorks & Humbs £151,000 £178,000 17.6%
Scotland £146,000 £171,000 17.0%
Wales £150,000 £174,000 15.9%
East Midlands £178,000 £204,000 14.8%
West Midlands £183,000 £210,000 14.8%
South West £241,000 £275,000 14.2%
East of England £288,000 £321,000 11.5%
South East £322,000 £358,000 11.5%
London £472,000 £505,000 7.1%

Source: Savills Research

“London’s housing market has been pushing up against the limits of mortgage regulation and affordability for some time,” says Lawrence Bowles, Savills research analyst.

“The Brexit vote was the tipping point that slowed price growth. Weakened sentiment, combined with expected interest rate rises, now point to small, short-term price falls next year.

“Greater economic and political certainty should trigger a return to growth in 2020, though this will be capped by borrowing constraints as gradual increases in the cost of mortgage debt impinge on affordability.”

LOOK TO THE NORTH FOR STRONGEST PRICE GROWTH

In contrast, the report expects regions where house prices have risen more in line with incomes to experience continuous growth over the next five years, with the average UK house price in 2022 expected to be 14.2 per cent higher than in 2017.

The strongest rise is expected to be in the North West, where the price-to-income ratio is 5.6 per cent.

Prices there are predicted to rise as much as 18.1 per cent (£28,000) by 2022, thanks to a housing market underpinned by job growth centred on Manchester, which has been attracting priced-out Londoners as well as young professionals attracted by a lower cost of living.

The North East and Yorkshire & Humberside are expected to see the next biggest price rises, growing 17.6 per cent each by 2022.

  2017    2018    2019    2020    2021    2022    Five-year average
UK AVERAGE 2.0% 1.0% 2.5% 5.0% 2.5% 2.5% 14.2%
North West 3.0% 1.5% 3.5% 6.0% 3.0% 3.0% 18.1%
North East 2.5% 1.5%  3.5%  5.5%  3.0%  3.0%  17.6%
Yorks & Humberside 2.0% 1.5% 3.5% 5.5% 3.0% 3.0% 17.6%
Scotland 2.5% 1.5% 3.5% 5.0% 3.0% 3.0% 17.0%
Wales 2.5% 1.5% 3.0% 5.0% 3.0% 3.0% 15.9%
East Midlands 5.0% 1.0% 3.0% 5.0% 2.5% 2.5% 14.8%
West Midlands 5.0% 1.0% 3.0% 5.0% 2.5% 2.5% 14.8%
South West 5.0% 1.0% 3.0% 4.5% 2.5% 2.5% 14.2%
East Anglia 2.0% 0.5% 2.5% 4.0% 2.0% 2.0% 11.5%
South East 2.0% 0.5% 2.5% 4.0% 2.0% 2.0% 11.5%
Greater London -1.5%  -2.0% 0.0% 5.0% 2.0% 2.0% 7.1%

Source: Savills Research

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