Savills expect 18% increase in UK house prices by 2017

UK housing market activity has picked up significantly this year year say Savills  with every month bringing a fresh set of improved data. 

 There are now more positive indicators than at any point over the past few years, signalling a period of higher activity and price growth in a market that had been expected to show little or no growth this year and next, according to international real estate adviser Savills which today issued revised 5 year forecasts.

The firm now expects UK house prices to average 18.1 per cent growth by the end of 2017, compared to the 11.5 per cent anticipated when its forecasts were originally published in November 2012.  This means that house prices will broadly keep pace with inflation over this period rather than falling in real terms.

A combination of government intervention, improving consumer confidence and low interest rates have come together to make current improvements look more prolonged than the short-lived bounce seen in 2010.

UK mainstream five year house price forecast table 

The revised forecasts anticipate that average prices will rise by 3.5 per cent this year, against an original forecast of 0.5 per cent, with the pace of growth picking up over the period of Help to Buy.  This means that the UK average house price will surpass its 2007 peak in 2015 though there will be significant regional and local variation.

“A combination of low interest rates and stimulus measures means there is capacity for improved price growth over the next three years or so,” says Lucian Cook, director of Savills residential research.  “But it comes at the price of later price growth in 2016/17 when interest rates are expected to start rising.  Overall, this means that on an inflation-adjusted basis our revised forecasts indicate that prices will increase by just 2.3% over the next five years.

“Help to Buy goes further than any of its predecessors in being aimed at all buyers, not just first time buyers, but we believe its primary impact will be increased transaction levels and that higher than expected price growth is a secondary impact.  It needs to be considered against the context that the market remains only partially functioning.   While the combined package of Help to Buy measures could add 400,000 transactions over the next three years or so, they would still remain 24 per cent below pre crunch levels

“Its launch into an improving market has triggered concerns that the Government will provoke another bubble.  But, in our view, these are overstated given the conditions which attach to the scheme. Reassuringly, rising market activity has been due to increased turnover of existing debt rather than the creation of new debt that defined the late nineties/early noughties market. 

“This is much more about bringing forward growth from later in the cycle because of a number of factors, not least buyer sentiment.”