Property transactions will continue to slide before ticking back up by 2022, Savills has claimed. But even then, transactions will still be around 500,000 below their pre-crash level.
Savills’ latest five-year housing market forecasts predict 1.19m transactions this year – lower than 1.2m last year – and a drop to 1.13m next year.
In 2019, it forecasts 1.15m transactions, while in 2020, 2021 and 2022 going from 1.17m to 1.19m and 1.2m in each year respectively.
The forecast claims it will be harder for home movers to get the extra cash to move up the ladder, while first-time buyers will also struggle.
It also predicts cash buyers will become more dominant, while the number of buy-to-let investors using mortgages will fall by 27%.
It said: “People will continue to trade up the housing ladder less often as they struggle to accumulate the equity and additional borrowing required, and first-time buyers will remain heavily reliant on the Bank of Mum and Dad or government initiatives such as Help to Buy.
“Cash buyers have become more dominant and this trend will continue. They now account for some 34% of all house purchases, and 45% of the total value of transactions. Although expected to become more price conscious, they will continue to be the largest buyer group, as others struggle to access the market.
“Mortgaged buy-to-let investor numbers are forecast to fall most dramatically, down 27% to just 55,000 by the end of 2022 as tighter mortgage regulations, increased Stamp Duty charges and the phasing out of mortgage interest relief combine to restrict buy-to-let investor activity.”
Savills also predicts that UK house price growth in the next five years will be at 14.2%, with regional variances.
The north-west will grow 18.1% by 2022, with London up just 7.1% over the same period, Savills predicts.
However, the agent claims rental growth will be higher in London over five years, up 17% compared with 15.5% in the rest of the UK.
Marc, can you confirm what “500,000 below their pre-crash level” means it terms of a percentage drop from pre-crash levels?
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Cash buyers represent 34% of all transactions. Wrong, the number of cash buyers I see in chains normally have a mortgage need somewhere. Cash is a term that gets dropped into conversation to justify a negotiation and someone’s ego and at best means there is no dependent house sale.
Affordability is only partly to do with interest rates. They need to not repeat the overused argument…so many pundits are starting to sound like R2 presenter Jeremy Vine…outraged by everything. 1/4% base rate rise does not make the world less affordable unless you are being interviewed by a journalist. It is the combination of base rate, high inflation eating into disposable income, increased costs through taxation, rising raw materials costs make everyone poorer and the fact that there are now so many self employed/entrepreneurs out there, who have lifestyle businesses that don’t necessarily score high credit ratings. It is a combination. Debt and credit scores and a reticence by the banks will restrain the market and its prices…remember they have to cover their Tier 1 finance requirements…making them risk averse. The only way prices can rise noticeably is for volumes to collapse so that it is the privileged few who can afford to move. Recessions sort out inflation as do many rate rises and there are 2 more predicted in the next 18 months or so assuming we aren’t slaughtered in a post Brexit agreement, squeezing disposable income further and again reducing the chances of price rises. Never judge a market on prices…there needs to be volume as well.
The wrong type of houses/flats are being built and supported by Help to Buy to meet the 1m a new homes target. There will be issues over dilapidation’s and poor build standards very quickly…ask Bovis Homes how they are fairing!!
Brexit and in particular the challenges to the city which accounts for 10% of GDP will have a big effect in the south east. This will affect earnings potential.
25 % of A level students are aspiring to go to Uni/further education. 30 years ago it was 8%. The generation coming through have debt ingrained into them and will affect their spending and mortgage power, forcing them to rent and at high levels of income.
Compounding price rises to predict a 14% increase in 5 years after a boom is reckless. It falsely build confidence and increases debt.
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