The UK’s north-south house price divide is expected to be flipped on its head in the next five years. House prices in northern England, the Midlands, Scotland and Wales are predicted to outstrip those in London, says Savills.
The upmarket estate agent forecasts the value of property in the north-west of England will rise faster than anywhere else in the UK. Its prediction is homes there will rise in value by 21.6 percent.
That contrasts sharply with the prediction of just 4.5 percent in London and the south of England, although property in central London is estimated to grow by 12.4 percent.
Regions outperforming London
Savills published the figures in its UK residential property market forecast, which predicts how the housing market will perform over the next five years.
According to its forecasts, Yorkshire and Humberside will be just behind north-west England in house price growth at 20.5 percent; the east and West Midlands and Wales are next on 19.3 percent; Scotland’s house price growth is predicted to be 18.2 percent; and the north-east will reach 17.6 percent, says Savills.
Affordability still key
Savills said affordability across the UK is still possible because mortgage repayments remain relatively low compared to the two decades before the 2008 financial crisis. But it warns any rise in the Bank of England base rate will impact on both homeowners and buyers.
Its forecast states: “The base rate hike in August was more about putting buyers on notice of what may occur in the future.
“The expectation is that base rates will rise gradually. This will put a squeeze on the amount people can borrow.
“From 2021, we expect the Bank of England base rate to rise from 1.5% to 2.75% by the end of our forecast period. This is unlikely to be a problem for those households already paying their mortgage.
“But, assuming it remains unchanged, a 3 percent aﬀordability stress test for new buyers will start to impinge on the amount people can borrow relative to their earnings. In turn, the rate of house price growth will be constrained.
“This is likely to have a much greater impact in London and the south-east where buyers are already operating on higher loan-to-income ratios than elsewhere in the UK. This adds to the regional dimension of our property forecasts.”