Savills is expecting transactions to remain stubbornly low over the next five years amid Brexit uncertainty.
Five-year forecasts released by the agent are based on a drop in sales volumes of 6.9% since the Brexit vote and the agent is predicting the market will fall a further 1% by 2023.
It said transactions have fallen from 1.61m in 2007 to around 1.14m this year, and predicts they will lift only very slightly to 1.17m in 2019 before falling to 1.16m in 2020 and then rising to 1.17m in 2021 before dropping again to 1.14m in 2022.
Savills is then predicting transactions will rise again over the following years, hitting 1.16m in 2023 – in other words, barely moving.
The market will be sustained by cash buyers and Government first-time buyer schemes as well as the bank of mum and dad, Savills said.
Yet it is also predicting that first-time buyer volumes will fall 2.7% over the five years.
The forecast is even less positive for buy-to-let investors with Savills predicting a 23% drop in activity by 2023 – which will in turn push rents up by 13.7% over the period.
| 2019 | 2020 | 2021 | 2022 | 2023 | 5 year compound | |
| Transactions | 1,175,000 | 1,160,000 | 1,175,000 | 1,140,000 | 1,160,000 | -1.30% |
| Earnings | 2.00% | 2.90% | 3.40% | 3.50% | 3.50% | 16.90% |
| Bank base rate | 1.00% | 1.50% | 1.80% | 2.30% | 2.80% | N/A |
Savills claims affordability rather than Brexit is a bigger issue facing the market.
It said the highest price growth is expected in the lower value markets such as the Midlands, the north of England, Yorkshire & Humberside, Scotland and Wales – particularly in areas that are still recovering to their peak values since the financial crisis – making these regions more affordable and providing room for loan to income ratios to increase.
The forecast predicts UK house prices will rise 14.8% from 2019-2023.
The biggest growth will be in the north-west at 21.6%, while London will lag at 4.5%, Savills said.
Lucian Cook, head of residential research for Savills, said: “Brexit angst is a major factor for market sentiment right now, particularly in London, but it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.
“That legacy will limit house price growth, but it should also protect the market from a correction.”
| Mainstream house price forecast | 2019 | 2020 | 2021 | 2022 | 2023 | |
| 5 Year | ||||||
| 2019-2023 | ||||||
| North East | 2.00% | 5.00% | 3.50% | 2.50% | 3.50% | 17.60% |
| Yorkshire & Humberside | 2.50% | 5.50% | 4.00% | 3.00% | 4.00% | 20.50% |
| North West | 3.00% | 6.00% | 4.00% | 3.00% | 4.00% | 21.60% |
| East Midlands | 3.00% | 5.00% | 3.50% | 3.00% | 3.50% | 19.30% |
| West Midlands | 3.00% | 5.00% | 3.50% | 3.00% | 3.50% | 19.30% |
| South East | 0.00% | 2.00% | 2.50% | 2.00% | 2.50% | 9.30% |
| East of England | 0.00% | 2.00% | 2.50% | 2.00% | 2.50% | 9.30% |
| London | -2.00% | 0.00% | 2.50% | 1.50% | 2.50% | 4.50% |
| South West | 0.50% | 3.50% | 2.50% | 2.50% | 3.00% | 12.60% |
| Wales | 2.00% | 5.50% | 4.00% | 3.00% | 3.50% | 19.30% |
| Scotland | 2.50% | 5.00% | 3.50% | 2.50% | 3.50% | 18.20% |
| UK average | 1.50% | 4.00% | 3.00% | 2.50% | 3.00% | 14.80% |
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