House prices in the UK are expected to continue growing, with steady rises over the next five years across the country, the latest five year forecast shows.
Cumulative growth in UK prices will total a little over 18% in the five years to the end of 2019, according to the latest forecast report from real estate firm Knight Frank.
It says that while political risk for the prime London property market has fallen, affordability constraints will limit price growth in the near term, and predicts that overall UK rents and prime central London rents will rise 2.2% and 3.5% respectively in 2015.
However, the risk that UK interest rates rise more rapidly than expected or that the global economy suffers a notable slowdown in activity remain the biggest risks to the UK housing market.
It explains that the cumulative impact of recent and future reforms to Stamp Duty, mortgage interest relief for investors, Capital Gains Tax and IHT will take some time to work through the UK housing market.
‘Despite the pace of tax change, our view remains that it is interest rates and economic performance which will shape the outlook for prices and demand,’ the report adds.
In the UK as a whole the forecast predicts house price growth of 3.5% for 2015, 2.5% next year, 3% in 2017, 4% in both 4.0% 2018 and 2019, to a cumulative 18.2% over five years. It also shows that while London saw growth of 17.8% in 2014 this is unlikely to be repeated with growth of 3.5%, 4%, 5%, 5.5% and 5.5% predicted.
There is a similar pattern for the South East which saw growth of 10.6% last year, with the current forecast for 5% this year, 3% in 2016, 3.5% in 2017 and 5% for the two following years. The South West had growth of 8% in 2014 but this will fall to 4% this year, then 2.5%, 3%, 4.5% and the 4%.
The prediction for East Anglia is 4.5% in 2015, followed by 3%, 3.5%, 4.5% and 5%, in the East Midlands the forecast is for 3.5%, 2%, 2.5% and then 4% in both 2018 and 2019 while in the West Midlands it is 3.5%, 2%, 2.5%, 4% and 4%.
For the North East the forecast is even at 3% this year followed by 2% in 2016 and 2017, then 3% in 2018 and 3.5% in 2019. In the North West it is 3%, 1.5%, 2%, 3.5% and 3.5% while in Yorkshire and the Humber the forecast is for growth of 3% this year, 2% in both 2016 and 2017 then 3.5% in both 2018 and 2019.
Wales saw annual price growth of just 1.4% in 2014 but this is expected to rise to 3% this year followed by 2% in 2016, 2.5% in 2017 and then 4% in both 2018 and 2019. Scotland is forecast to have growth of 3.5% this year, 2.5% in 2016, 3% in 2017 and then 4% in both 2018 and 2019.
This year is likely to see muted change in the prime property market in London, according to the forecast. Prime central London saw growth of 6.7% last year but this is expected to fall to just 1% this year followed by a recovery to 4.5% in 2016, 5% in both 2017 and 2018 and 6% in 2019. While in prime outer London, which saw growth of 10.5% last year, the forecast is for 3% this year then 5.5%, followed by 5% in 2017, 2018 and 2019.
Rental prices are not expected to vary much with a rise of 2.2% this year, then 2.3% in 2016 and 2017 and 2.4% in 2018 and 2019. There is a similar prediction for the prime rental markets in London. Prime central London, which saw rental growth of 4% last year, is forecast to see growth of 3.5% this year, followed by 3.3% in 2016 and 2017, then 3% in 2018 and 2019 while in prime outer London which saw growth of 0.5% last year the forecast is for 4% growth this year followed by 3.3% next year, 3% in 2017 and then 2.8% in 2018 and 2019.