Both house and rent prices are expected to rise at a similar rate over the next five years, according to the latest residential property forecast from Knight Frank.
The company predicts that average rents across the country will increase by 1.2% this year, 2.5% in 2018, 2019 and 2020, then by 3% in 2021 and 2022 – total growth of 14%.
In London, rents are expected to rise by 0.7% this year, 3% in 2018 and 2.5% in 2019, followed by three years of growth at 3% – a cumulative 15%.
However, rent price growth in the outer prime London market is forecast to see less robust increases. For this sector, Knight Frank predicts that rents will fall by 3.5% this year and by 1% next year, before returning to growth with an increase of 1% in 2019, 2% in 2020, 2.5% in 2021 and 3% in 2022 – a total rise of 8%.
Regarding house price growth, Knight Frank forecasts an average increase of 1.5% this year, 1% in 2018, 2% in 2019, 3% in 2020, 3.5% in 2021 and 4% in 2022 – a cumulative 14.2%.
The firm expects house price growth over this five-year period to be led by gains in the Midlands, East of England and North West.
The report states: “Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth reflecting this in many locations. The variations currently observed in the prime housing markets in London and beyond are set to continue.
“The UK may now be entering a period of interest rate rises, but, even so, we expect rates to be low compared to long-term norms by the end of the forecast period. While development levels are rising across the country, the shortage of new homes is unlikely to be fully reversed in the coming years, and that will underpin pricing. On the other hand, factors such as deepening affordability pressures and property taxes will continue to weigh on pricing.”
Yesterday, we reported on the Government’s plans to unlock a £25m fund to develop more and better housing.