Lack of affordability blunts London house price growth – Savills
02-12-2015
Mortgage Solutions Hannah Uttley
House price growth in London is expected to rise by just 10.4% over the next five years compared to 19.3% across the UK as a whole, Savills research finds.
Savills estimated that the growth of mainstream property prices in London will eventually fail to keep up with the rest of the UK due to limited pay rises, fast-moving house prices and stringent mortgage regulation.
The total value of housing in London soared by 20% in 2014 alone and by 61% over the past five years, equivalent to £563bn.
In its residential property focus report, Savills said mortgage regulation was one of the main factors blocking future house price growth.
Savills research spokesperson Katy Warrick explained: "This new lending environment is one of loan-to-income caps, stress testing of borrowers' affordability and capital repayment requirements. Coupled with fast-moving house prices against a context of limited income growth, this means higher deposits are required.
"Jump forward five years and we expect that prices will grow just 10.4%, as fewer first time buyers will have been able to access home ownership for these reasons."
Savills said it was already seeing some of the affordability implications play out. According to Nationwide figures, house prices grew by just 1.6% in the last six months across the capital, compared to annual growth of 17.8% during 2014.
The report also highlighted the growing number of prime housing sales, with London dominating the market. The number of £1m+ sales in 2014 is expected to have been higher than 2007 for the first time.
Some 18,000 sales were made on prime properties in 2014, with the number of these sales increasing three-fold over the past 10 years.