Residential Property Forecasts
Autumn 2017

Residential Property Forecasts
The six factors that underpin our housing forecasts

2 November 2017, by Savills Research

The housing market is shaped by many moving parts. Lucian Cook outlines six key factors that enable Savills to deliver the best predictions for the future of the market

Forecasting house prices is not for the faint hearted. Getting it right presupposes you have made the right economic assumptions, can predict the direction of government and Bank of England policy and have the ability to foresee the fickle nature of buyer sentiment.

 

And yet there is plenty we do know, or can predict with confidence, that allows us to best estimate the future of the housing market. In particular, there are six key factors (below) that influence our forecasts.

They show how the UK housing market has many moving parts. How we occupy our property changes over time and between generations. That means house prices, which we consider at a regional and national level in House price outlook, are just part of the picture. Transaction levels can be as much of a variable, whether across the market or among different groups of buyers, as we explore in Changing fortunes for buyers.

Our thoughts on what these six factors mean for the market are laid bare throughout this edition of Residential Property Forecasts.


1

In the short term, there will be uncertainty over what Brexit means for the UK economy and, just as importantly, for individual households’ wealth and financial security. While it will take time for the precise impact to become clear, this uncertainty will make buyers more cautious in the short term at least.

2

Mortgage interest rates in the UK are likely to rise over the next five years. That is likely to put a squeeze on the amount people can borrow in an age of mortgage regulation. Dramatic increases in the cost of borrowing, that would create undue financial stress on households, are unlikely.

3

Buy-to-let investors are now beginning to feel the effect of the mortgage regulations that owner-occupiers have lived with since 2014. They also now bear greater stamp duty costs and, unless there is a change of political heart, will increasingly be affected by restrictions on income tax relief.

4

London has shown much greater house price growth than the rest of the country for the majority of the past decade. So, it is likely to be more constrained than the rest of the country by the factors above.

5

In previous cycles, we have always reached a point where house price growth in the north of the country exceeds that in the south. In the past, it was facilitated by a strong economy or relatively unrestricted access to mortgages.

6

We are not building enough homes of the right type in the right places to meet demand. However, there seems to be an increased political desire to address this.

Articles from Spotlight: Residential Property Forecasts – Autumn 2017

House price outlook

02 November 2017

House price outlook

Lawrence Bowles assesses growth prospects for the UK housing market against a backdrop of economic and political pressures

Has London’s market run out of steam?

A decade of strong growth in the capital’s housing market has seen it become dislocated from the rest of the UK – and left the market pushing against the limits of mortgage regulation and affordability

Northern exposure

02 November 2017

Northern exposure

While London is forecast to lag behind the rest of the UK over the next five years, which region will see the biggest growth? Here are six reasons why we believe it will be the North West

Changing fortunes for buyers

02 November 2017

Changing fortunes for buyers

In the year to the end of June 2017, there were 1.2 million transactions in the UK housing market, half a million fewer than 10 years ago. This reduction in number is one of the legacies of the credit crunch, but how is it shaping the property market?

Pushed to the limit?

02 November 2017

Pushed to the limit?

As wages return to growth, rents for the mainstream market look set to grow faster in London – although there is still potential outside the capital, with high-yielding employment hubs leading the way

Realism is helping to keep the prime markets moving

Prime central London values now sit 15.2% below their 2014 peak, but recent falls have been slowing. Has the market found its level? We look at the prospects for the prime London and country markets

Stepping up on delivery

02 November 2017

Stepping up on delivery

To have any impact on affordability, we need to build more homes. We look at the catalysts that could shape meaningful progress: government pressure on developers, new housebuilders, and increasing land supply

 
 

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Key contacts

Lucian Cook

Lucian Cook

Director
Residential Research

Head Office London

+44 (0) 20 7016 3837

 

Lawrence Bowles

Lawrence Bowles

Associate Director
Residential Research

Head Office London

+44 (0) 20 7299 3024