The UK real estate market in 2015

Capital value growth across all sectors was stronger than forecast in 2014. It is expected to rise throughout 2015, albeit at a slower rate.

10 February 2015, Words by Savills Research


Strong capital value growth was undoubtedly the key theme of 2014, with growth across all sectors stronger than we were forecasting at the beginning of the year. We expect to see continuing capital value growth across all prime sectors in 2015, albeit at a slower rate.

The general election in spring 2015 will definitely have some effect on sentiment, though in the agricultural and commercial sectors we expect 
the effects to be relatively muted. 
In the residential markets the threat of mansion tax, combined with the Mortgage Market Review could lead to a more sustained hiatus in capital value growth in 2015.

Generally we expect that the macro-economic story for the UK will remain benign, with base rates remaining unchanged until early 2016, and the combination of low oil prices and recovering incomes giving a boost 
to the UK consumer.

The high returns that will be thrown off by all property sectors in the UK will continue to attract attention, and we expect that UK real estate will continue to deliver high returns in comparison to other asset classes.

This will mean that domestic and international demand for prime and good secondary assets will be strong, though we expect to see more focus on supply and demand fundamentals in 2015, rather than just the potential for yield shift.

Our top picks across all sectors are for markets with structural or impending undersupply. We also expect to see more investors looking to the next stages of the recovery, and local markets and regions that will benefit next from the ripple of economic growth away from the south of the country.

Investors who are looking for the highest returns will continue to look for development opportunities, and we particularly favour outer London and the key regional cities as development opportunities in 2015. Speculative development activity will remain sparse, due to investor and lender caution, but those who are brave enough to undertake it will do well.

Overall, we expect that 2015 will be another strong year for UK real estate, but investors are going to have to work harder to identify markets and sectors that will deliver high returns.

click on image below to enlarge

Graph 1



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Lucian Cook

Lucian Cook

Residential Research

Savills Margaret Street

+44 (0) 20 7016 3837


Mat Oakley

Mat Oakley

Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8781


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