Real estate agent Savills has published a report indicating that UK property prices could rise over the period from 2020 to 2024. Research conducted by the company suggests that the recent weakness in the property market may be about to end.
The news confounds recent reports which gave the impression that Brexit would cast a long shadow over the UK property market for the foreseeable future. How and why does the report by Savills challenge this view?
Property price appreciation
One interesting forecast is that the current trend for the Midlands and North to outperform London and the South-East will continue. This view goes against the general assumptions made by many property professionals that the traditional North-South divide will reappear once the market has regained stability.
The report goes further in analysing various regions of the country and estimates that house prices will increase generally by 15.3% over the period from 2020 to 2024, while growth in the North-West of England could reach 24% over the same time frame. Although the East and South-East of England could see lower average growth of just 11%.
While the general figure of a 15.3% increase across the UK may not equate to surefire growth in the short-term, it is nevertheless an optimistic interpretation of the UK market. Furthermore, the report puts forward the view that the current cycle began in 2016, when property prices in London especially began to reach the upper limits of unaffordability.
It is, therefore, not unreasonable to suggest that this view is only part of the story where London is concerned, as the capital is a region of the UK that has always been hugely popular with overseas investors.
Prime property market
London’s prime property market is set to deliver an increase of 3% over the coming year with growth in the region of 20.5% from 2020 to 2024. This will not come as a surprise to those who follow the London market which has its own quirks and idiosyncracies, but the capital is also subject to the vagaries of the UK currency.
Since the 2016 referendum on membership of the EU, sterling has fallen by more than 20% against major currencies. Even though there has been some rallying of late, the UK currency is still well below its level prior to the referendum, something that benefits foreign investors.
It is also noteworthy that prime property prices outside London are expected to increase by 14.2%, while luxury homes across the rest of the UK are forecast to grow by 11.5% between 2020 and 2024.
A rosy future
Currently, there is very little real certainty regarding Brexit, the time scales involved, eventual outcome and what it may mean for the UK. However, the report by Savills undoubtedly gives some encouragement to those considering long-term property investment across the UK.
In this regard, it is most likely best to regard the price of prime property in London in isolation as it is essentially a market within a market. Nonetheless, it is heartening to see the impressive growth in prices predicted for some regions in the Midlands and North of England.
As of September 2019, the average house price in the UK is £234,370 and the index stands at 122.92, according to the UK House Price Index (UKHPI). Property prices have fallen by 0.2% compared to the previous month, but have risen by 1.3% compared to the previous year.
The HPI uses house sales data from HM Land Registry, the registers of Scotland and Land and Property Services Northern Ireland, and is calculated by the Office for National Statistics (ONS).