Savills predicts UK house prices to fall 11% by 2016
Friday, 11 November 2011 10:32
House prices will fall by 11 per cent over the next five years, back to price levels seen nearly a decade earlier, according to property broker Savills.
Low interest rates will keep repossessions down and head of a house price crash, but weak economic growth and difficulties accessing mortgage finance will keep prices low.
The research points to the increased cost of living as the chief threat to property prices, in its five-year forecast.
House prices were at their peak in 2007, when the average price was £184,000, compared with the average property price of today, at £161,000. Savills forecast that this will rise to £170,000 by 2016, a six per cent rise in five years.
When this is linked in with inflation it represents an 11 per cent drop in house prices over the period. The research suggests that the stagnant state of the property market is set to continue for the next five years. Savills predicts that there will be seven million fewer property moves than expected based on previous data.
Rents are likely to rise dramatically however, as the ability of potential homeowners to secure loans for mortgages becomes increasingly difficult. Savills expects rental costs to rise by 20.5 per cent in nominal terms or 3.8 per cent when adjusted for inflation. This should increase the rental yield available to landlords to around six per cent.
Savills predicts regional differences with prime property in London set to match the growth seen in rental costs and outperform the rest of the country, reinforcing the north-south divide of property prices, which was highlighted last month by property website Rightmove who revealed that the average cost of a property in Southern England is more than double than the cost of an equivalent property in the north.
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