House price dip in London to continue for another yearHouse price dip in London to continue for another year https://www.ngiresidential.co.uk/wp-content/uploads/2018/05/House-price-dip-in-London-1024x576.jpg 1024 576 NGI Residential Mortgages NGI Residential Mortgages https://www.ngiresidential.co.uk/wp-content/uploads/2018/05/House-price-dip-in-London-1024x576.jpg
Annual house price growth is likely to slow to 3 per cent this year, and remain at this level until 2025, according to new analysis from accountants PwC.
Its projections show that the average property in the UK will rise in value from £221,000 in 2017 to £285,000 by 2025.
Property price inflation at this level means that the ratio of house prices to earnings is likely to remain stable, but PwC says this will continue to be at historically high levels.
However, while prices should edge upwards nationally, PwC is predicting that prices could drop by as much as 2 per cent in London this year, and that this negative trend may continue into 2019.
PwC’s senior economic Richard Snook says: “UK house price growth remained resilient in 2017 despite a weakening economic backdrop, but has shown signs of moderating during the first half of 2018, particularly in London.
“Affordability in the capital has been stretched due to three factors: a high deposit saving hurdle, increased economic uncertainty relating to Brexit acting as a drag on international investment, and a reduced number of housing transactions due to stamp duty changes.”
However, PwC is predicting house price growth in the capital will pick up again from 2020. It is projecting that the average price of a London home will stand at £509,000 by 2022. This compares to just £141,000 in the North East – predicted to have the cheapest housing in the UK at this date.
PwC points out that interest rate rises will only have a “limited impact” on the housing market. It points out that 94 per cent of new mortgages last year where fixed rate deals. This compares to just 50 per cent in 2010.
In addition, only around 28 per cent of UK households now have a mortgage, as opposed to renting or owning their home outright.
Combining these two factors it estimates that only 11 per cent of all UK households would be immediately affect if mortgage interest rates rose. This compares to a figure of 24 per cent in 2012.
PwC says that the changes to stamp duty have been one of the biggest brakes on the housing market. The accountant’s head of real estate tax, Rob Walker says: “In theory 95 per cent of buyers are winners from the removal of the previous ‘slab’ system. But the increase in stamp duty for homes above this threshold appears to have contributed to an overall showdown in the property market.
“High stamp duty rates are dissuading people from upsizing and downsizing which is affecting both ends of the market. Government should look at other options to kick start the housing market again.”
* Content Source – Mortgage Strategy
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