Housing transactions will drop next year, and by 16% in 2018, as weaker sentiment and uncertainty takes hold, Savills is predicting.
The forecasts, which came before judges ruled that Parliament would have to agree any Brexit deal before Article 50 is invoked, estimated that transactions would drop to 1m in 2018, down from 1.2m this year, and a predicted 1.1m in 2017.
The predictions, which may now need rethinking, claim times will be tough until early 2019 in the midst of Brexit negotiations.
Once concluded, Savills says economic clarity and confidence can return, meaning house prices and transactions will recover. But Savills also warns that a likely interest rate hike in 2020 could hit confidence, pushing numbers down.
Lucian Cook, Savills UK head of residential research, said the forecasts wouldn’t be revisited due to the court ruling, adding: “The forecasts as stated, while they assume clarity regarding the terms of our exit from the EU by the end of 2018, also already have built into them the assumption that there will be a great deal of economic uncertainty during the period, which will compound the effects of underlying influences on the housing market such as MMR and stamp duty.”
Prices are also expected to be flat until 2018 when they grow 2% before rising by 5.5% in 2019 and falling to 3% in 2020 and 2% in 2021. This will mean house prices will grow just 13% over five years.
Savills estimates first-time buyers will face ongoing challenges in raising a deposit and numbers are expected to fall 15% from 325,000 this year to 275,000 in 2018.
Tougher lending criteria will also constrain mortgaged home owners looking to trade up, while cash buyer numbers, currently 35% of the market, may be discouraged by increased stamp duty, Savills warns.
Buy-to-let transactions are expected to fall from 120,000 to 90,000 in 2021, and hit a low of 80,000 in 2018 as tax changes begin to press.
Lower transactions will also mean rental growth outperforms prices, according to Savills.
Average rents are forecast to rise by a total of 19% per cent between 2017 and 2021, and 24.5% in London over the same period.
Savills is predicting UK rental growth of 2.5% next year, 4% in 2018 and 5% in 2019, before dropping to 3.5% and 3% in 2020 and 2021, just after the mortgage interest relief changes are complete.
Cook said: “There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before.
“The effect of Brexit is complicating a natural shift towards the later stages of the housing market cycle, when the strongest growth is seen beyond London and the South-East.
“What is clear is that the housing market does not like political and economic uncertainty and this points to a lower growth, lower transaction market across the board.”
How does your region fare when it comes to the Savills house price forecasts?
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2017-2021 total | |
| UK | 5.0% | 0.0% | 2.0% | 5.5% | 3.0% | 2.0% | 13.1% |
| London | 7.0% | 0.0% | 3.0% | 4.5% | 2.0% | 1.0% | 10.9% |
| South East | 7.0% | 2.0% | 2.0% | 6.5% | 4.0% | 1.5% | 17.0% |
| East of England | 6.5% | 2.5% | 2.5% | 6.5% | 4.0% | 2.0% | 18.7% |
| South West | 5.0% | 1.0% | 2.0% | 6.0% | 3.0% | 1.5% | 14.2% |
| East Midlands | 5.0% | 0.0% | 2.0% | 5.5% | 3.5% | 2.0% | 13.6% |
| West Midlands | 4.5% | -0.5% | 2.0% | 5.0% | 3.5% | 2.0% | 12.5% |
| North East | 2.5% | -2.5% | 1.5% | 5.0% | 2.0% | 3.0% | 9.2% |
| Yorks &Humber | 3.5% | -2.0% | 1.5% | 5.0% | 2.5% | 2.5% | 9.7% |
| North West | 3.0% | -2.0% | 2.0% | 5.5% | 3.0% | 3.0% | 11.9% |
| Wales | 4.0% | -2.0% | 1.5% | 5.0% | 2.5% | 2.5% | 9.7% |
| Scotland | 2.5% | -2.5% | 1.5% | 5.0% | 2.0% | 3.0% | 9.2% |
Savills Research – 5 year mainstream market forecasts
Does no one in Savills own a house? Hang on let me get the shotgun out and shot myself in both feet!
Come on guys we all know that forward forecasting about the property market is never accurate. Why not take your stats and look for some positives
If respected firms like Savills keep predicting Armageden it will help it happen!
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I would love to see how their predictions in the past have compared with actual results as they happened. Can PIE print the tables from 5, 10, 15 years ago? Are they available ?
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Try http://www.savills.co.uk/research/uk/residential-research/forecast-pages/mainstream-capital-values.aspx
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thanks
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Given that Savills only cover the very top of the market I would assume their predictions (and I havent yet met anyone who can tell the future), are largely irrelevant to 95% of the population and therefore industry.
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Savills used to cover the very top end of the market. These days they’ll take anything they can get. True of most of us I suspect.
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