UK house price growth exceeding expectations with strong midterm rises predicted

Average UK house price growth has exceeded all expectations over the past year, leaving some markets with reduced capacity for further mid term growth, according to a new report.

As a result international real estate adviser Savills has released a revised five year mainstream market forecasts taking account of growth seen in the first half of 2014.

The firm now expects average annual UK house price growth to settle at 9.5% this year, up from the previous 6.5% forecast. This will be followed by 4% growth in 2015 and 25.7% overall in the five years to the end of 2018, just fractionally higher than the 25.2% originally forecast.

The most notable changes to the published Savills forecasts are for mainstream London and, to a lesser extent, the corresponding markets in the South and East of England.

So far this year, house price growth in London, the South and East of England has significantly exceeded forecast, with all expected to end the year well into double digits.

Price growth in these mortgage-dependent mainstream markets remains high according to the majority of relevant indices, though there are signs that demand is weakening, with lead indicators suggesting a change in sentiment in London.

In London, full year growth is expected to settle at 15% against a previously published forecast of 8.5% despite an anticipated slowing in the second half of the year. While the five year growth forecast for the period 2014/2018 remains almost unchanged, the rate of recent growth will mean affordability will become stretched as and when interest rates rise.

The markets of the South and East of England were all originally forecast to show marginally higher levels of growth than London in 2014 at 7% but have in fact underperformed the capital to date. Nonetheless, they too are now expected to end the year in double digit growth.

These markets are still expected to show the strongest five year growth, outperforming London, as evidence mounts of the flow of buyers and equity out from the capital. The Midlands and the North have the potential to outperform thereafter, as has been seen in previous cycles.

Source: www.propertywire.com