London house price forecasts borough by borough

We recently covered a report by estate agent Savills which suggested that London house prices on the whole will not start to rise until 2020. They are expected to dip in 2017 and then be main relatively subdued until the rise in 2020. However, KPMG has issued another review of the London housing market looking at individual boroughs and what will impact the London housing market in the short to medium term.

UK economy

KPMG has a very deep understanding of the UK economy and suggestions that the UK economy will remain fairly subdued for the short to medium term are worth listening to. We know that there are a number of dark clouds hovering over the UK economy such as Brexit, political uncertainty and a recent change in interest rate policy by the Bank of England. While many believe Brexit offers good long-term opportunities to invest in the UK it is unlikely we will see widespread investment while uncertainty surrounds the talks with the European Union.

London boroughs

It is ironic but we will be listing some prominent figures from the KPMG report forecasting house price growth up to 2020. These single digit figures may surprise many people because we have become accustomed to larger annual rises than KPMG is forecasting up to 2020. Some of the more prominent figures include:

Hackney +5.31%
Westminister +4.27%
Lewisham +4.11%
Waltham Forest +4.03%

These are the only London borough housing markets expected to show growth above 4% up to 2020. If we now look at the bottom of the table there are some surprising entries:

Richmond upon Thames +1.65%
Harrow +1.93%
Hounslow +2.00%
Bromley +2.12%
Sutton +2.18%
Ealing +2.29%
Havering +2.40%
Croydon +2.43%
Bexley +2.43%
Enfield +2.46%
Kingston upon Thames +2.46%
Hillingdon +2.50%

The remainder of the London boroughs are expected to show increases between 2.5% and 4% which is minimal compared to recent performance.

Impact of EU immigration

A reduction in the number of immigrants arriving from the European Union will impact the London housing market as a whole. We know this, we also know that the financial sector is looking to rebase within the European Union if no side deal can be negotiated. So, it may surprise many to learn that the Royal Borough of Kensington and Chelsea has the highest proportion of EU born residents according to official government figures from 2016. This borough also has the highest house price to earnings ratio in London and while it is difficult to forecast with any real confidence what will happen post Brexit, this particular borough does seem to have a lot to lose.

As we have touched on in recent articles, there is the potential for the EU immigration shortfall to be made up to a certain extent by the likes of US investors. This is a side effect of the fall in the value of sterling against the dollar in light of last year’s Brexit vote. While sterling has recovered slightly of late, we were looking at a circa 20% fall against the dollar which obviously makes UK property more attractive.

All of these research notes into the UK housing and property markets make interesting reading but there are a lot of variables which may change significantly.

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