UK house price rises for 2014 almost twice as high as predicted

UK house prices will end the year 9.5% higher than they started it, but the strength of increases this year means that in London the market could flatline in 2016, property firm Savills said on Tuesday, as it revised its forecasts for the next five years.

The firm had predicted a 6.5% increase in prices across the country in 2014, but said that growth had “exceeded all expectations”. As a result it has revised up its forecast for the current year, and its prediction of total growth by the end of 2018 to 25.7% from 25.2%. Its five-year forecast assumes mortgage rates will have risen to an average of 5% by 2018.

The firm said over the five years to the end of 2018 it still expected prices to rise more quickly in the south-east and east of England than in the capital “as evidence mounts of the flow of buyers and equity out from the capital”. It added: “The midlands and the north have the potential to outperform thereafter, as has been seen in previous cycles.”

Savills UK head of residential research, Lucian Cook, said house prices had been underpinned by record low interest rates, rising loan-to-income lending and pent up demand from buyers re-entering the market as the economy and consumer sentiment have improved.

Separate figures from researchers at Knight Frank show that the value of land suitable for development in England and Wales increased by 2% in the first half of 2014.

In London, where pressure on land is at its greatest, Knight Frank said the cost of land had recorded double-digit growth since the second quarter of 2013. In prime parts of London, development land went up by 18.9% while across Greater London prices rose by 14.2%.

Source: The Guardian