It is always risky making property predictions but Savills has got its crystal ball out again to revise previous house price forecasts due to the coronavirus pandemic.
The agent had forecast last year that the prime central London (PCL) market would return to growth during 2020.
But the agent has now acknowledged that the pandemic will push that back by a year, even with the new Stamp Duty holiday.
Savills said PCL prices fell by 1.1% in the second quarter of 2020 and is now predicting a decline of 2% for this year as buyers are hampered by travel restrictions and may have had their wealth hit by the pandemic.
The recovery, it claims, will instead be next year with a prediction of 4% annual growth followed by a peak of 7% in 2022 when Brexit negotiations are expected to be settled.
It is predicting 15.7% growth over the next five years.
Savills was also less excited about the Stamp Duty holiday for the PCL market but suggested there would also be a rush to beat the new overseas buyer’s rate that is due to be introduced in April 2021.
Lucian Cook, head of residential research for Savills, said: “The modest price adjustment for 2020 reflects not only where pricing already sits relative to peak, but also the relative absence of people actually looking to divest themselves of trophy London assets.
“These factors are likely to continue to insulate this part of the market against further price falls over the rest of the year.
“Also, while the Stamp Duty holiday announced this week by the Chancellor is unlikely to have a material impact on decisions in this part of the market where values average around £4.5m, when viewed in combination with the pre-announced overseas buyer’s surcharge due to be introduced in April 2021, it may act as a fillip to market activity in the run up to the end of March.”
Others are less sure of how easy it is to predict the property market.
Marc von Grundherr, director of London agent Benham & Reeves, told EYE: “It’s somewhat difficult to predict actual house price rises or falls in percentage terms specifically – especially four years hence.
“It’s a bit like today predicting the temperature for August 21.
“We know it’s probably going to be warm but to say it will be 24.5 degrees centigrade with a light wind from the east and, later in the day, a light covering of cloud leading to a small chance of showers in the northern part of the country’ is folly really.
“The upshot is that prices will be underpinned by market fundamentals – employment, interest rates, availability of mortgage funds, sentiment and, in London especially, foreign buyer appetite.
“All things considered I see these all being broadly positive for the foreseeable.
“In other words, a ’summer’ of housing market optimism in the medium to long term.”