London Property Boom to End (Temporarily) in Election Year?
2015 will apparently be the year that London’s unprecedented property market growth will come to an end… at least until 2016.
London property prices in general are likely to stagnate for the year of 2015, according to a report by Savills, and prime luxury areas like Knightsbridge and Mayfair may actually see a price drop of 0.5% due to uncertainty about the Mansion Tax. However Savills is also predicting that market growth with return in 2016 and that by the end of 2019 London property prices will overall be 10.4% higher than their current value, and that the prime London properties will be 23% higher in price by that time.
So what will be causing these market changes? Lucian Cook, head of residential research for Savills, says that these predictions are influenced by a number of factors:
“We expect wage rises, an improving economy and greater recycling of existing housing wealth between generations to support growth, while mortgage regulation is likely to prompt greater reliance on the bank of mum and dad with more equity released by downsizing.”
Certainly the new regulations for banks and building societies regarding affordability checks for lending and mortgages has already started to slow the price growth in the London market. These changes in property value are unfortunately not likely to help the average person looking to purchase property. The number of households in the private rented sector has been increasing and will continue to do so: the number is expected to increase by 1.2 million in the next 5 years, while the number of people owning and living in their own homes will fall by 200,000. Halifax has said that the house price-to-earnings ratio has increased from 4.69 in October 2013 so that the average cost of a home in the UK is now “five times the average earnings of a full-time male employee”.
The UK-wide housing market is, in contrast to London values, set to see a 2% increase in house prices for the election year, and Scotland will even see a 3.5% increase.
Read more at The Guardian