UK house price forecast:Brexit uncertainty stalls growth but the market looks set to recover within five years

As the UK's uncertain exit from the EU prolongs economic instability, a new report reveals what this means for the UK housing market over the next five years...

Click to follow

The High Court ruling that Parliament - and not Theresa May's government - should have the power to evoke Article 50 in order to trigger Brexit is set to prolong uncertainty in the property market.

Two years of exceptionally low growth has been forecasted for the UK in a report by Savills, which also predicts a dip in house prices in Scotland, Wales and the north of England. But the estate agent expects the market to pick up again by 2019.

In fact, Savills tips that five-year growth of 13 per cent (+£28,000) should take the average UK house price to £242,000 in 2021.

The East and South East regions are expected to grow the fastest over the next five years - a total of 18 per cent to £345,000. These sought-after regions are forecasted to outpace London, which will see comparatively modest rises of 11 per cent, but a significantly higher average house price of £533,000.

“There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before,” says Lucian Cook, Savills UK head of residential research.  

“What is clear is that the housing market does not like political and economic uncertainty and this points to a lower growth, lower transaction market across the board.”

Five-year forecast
Buyer sentiment is expected to remain fragile for the duration of Brexit negotiations, resulting in fewer transactions. However, low interest rates will prevent the market from falling too far.

Once homebuyers have greater clarity - and confidence - the market will should start moving again, with a five per cent hike in prices expected in 2019. 

Interest rates are likely to follow this spike, causing price growth to slow to around 2.5 per cent over the next couple of years.

What this means for buyers and renters
Although slowing prices could be perceived as a positive for those trying to get on to the ladder - or climb it - low levels of wage growth is also anticipated. Rising rents - up to 25 per cent higher, a result of increased demand from struggling buyers - are also anticipated, potentially making it more difficult for buyers to save for a deposit.

As students with much higher levels of debt come to the market, and mortgage regulation remains strict, London looks set to continue along its path of becoming a city of renters.

"The real hope for renters is that policy broadens to deliver higher levels of build to rent housing," says Cook. "Increasing supply will be the route to reducing upwards pressure on rents."

Strongest growth predicted in London's outer boroughs
The relative affordability of the capital's outer boroughs has led to strong price growth over the past few years, as squeezed Londoners look further afield for affordable homes, more space and better value.

This trend is expected to continue, especially in the east London boroughs of Newham and Barking & Dagenham as lower prices, future transport upgrades, and potential for regeneration mark them out as places to watch. 

Follow us on Twitter @HomesProperty, Facebook and Instagram