Knight Frank is predicting that house prices will increase by 24% in the next five years. In its UK housing market forecast for Q4 2013, published today, Knight Frank is predicting house price growth of 7% both this year and again in 2014. It predicts price growth will slow to 4% in 2015 and 3% in both 2017 and 2018.
The forecast follows Savills, the estate agents, which predicts house prices will rise by 25% over the next five years.
Knight Frank expects prime central London to see a slower growth rate of 20% over five years with 6.5% this year and 4% next year. It predicts the market will stall in 2015 when there will be no increase in prime central London before picking up to 5% growth in 2016, 2017 and 2018.
The property firm expects outer London to grow more strongly than prime central London as market dynamics change. The report says “modest” improvement in homebuilding will not have any impact on pricing in the next few years as under-supply continues. The study expects price growth to slow as the Help to Buy schemes come to an end in 2016 but predicts a stronger economy will be able to cope with a stimulus-free housing market.
Knight Frank global head of residential research Liam Bailey says: “For the first time in five years we can be broadly positive about the UK housing market. Price growth is encouraging transactions, contributing to labour mobility, and first-time buyers are able to access the market in a way they could not even 12 months ago. Importantly these improvements are not limited to London, they are spreading. There is however a flip-side to these improvements. Rising prices in the short term will limit longer term growth. The fact remains that pricing in the UK is high in historic terms, and while the Government can encourage activity over the next two to three years, it can not change the fundamentals surrounding market affordability, especially as low interest rates and Government interventions start to unwind.”