London house market set to flatline

After a long run of good growth London’s housing market is expected to flatline next year, with five-year price growth totalling 10.4%, the lowest of any region. This is according to new research from Savills, which warns mortgage constraints could encourage people to look outside London for more affordable property. As a consequence, the South East and East of England are expected to enjoy the highest levels of growth, with 26.4% and 25.2% respectively. With house prices in London averaging 30% higher than the pre-recession peak, those who do stay in the capital will increasingly look to the private-rented sector. Savills estimates that 250,000 more London households will be living in private-rented accommodation by 2019, resulting in less housing market activity. Sustained stress testing of mortgage borrowers will further suppress transaction volumes, which currently stand at 1.2 for the year, far below the pre-recession level of 1.7m. There is expected to be no net growth in first-time buyers for the next five years. Those who are established on the London market are not safe from the future. The mansion tax, should it be implemented, would affect London harder than anywhere else. Savills predicts that prime London would suffer average price falls of -5.0%. Lucian Cook, head of residential research at Savills, said “We expect wage rises, an improving economy and greater recycling of existing housing wealth between generations to support growth, while mortgage regulation is likely to prompt greater reliance on the bank of mum and dad, with more equity released by downsizing.” alex.horne@estatesgazette.com