While the London property market has been one of the best performers in the world since the 2007/8 mortgage crisis, experts believe that 2015 could see the wider UK market outperforming London. Researchers at the Centre for Economics and Business Research (CEBR) this week issued a very interesting and detailed study of the UK property market containing forecasts for 2015.
So why do experts expect the rest of the UK to outperform London and how long will this anomaly last for?
Property prices in 2015
The CEBR is forecasting that London property prices will fall by around 3.6% in 2015 with overall UK property prices expected to rise by 1.5%. It will come as no surprise to learn that this would be the first time that UK wide prices have outperformed London since 2009. However, like so many negative elements of the London property market this expected slowdown will be a relatively short-term phenomenon with growth of 2.7% predicted for 2016 with UK wide growth expected at just 2.3%.
The London property market has become something of a safe haven for many property investors although there are a number of reasons for the predicted short term slowdown.
As we have seen in the past, general elections around the world tend to have a relatively short-term impact on property prices and investor sentiment. While talk of increased stamp duty for relatively expensive houses, the so-called mansion tax and other tax increases have made headline news, the reality is that the UK property market in particular tends to learn to deal with these in the longer term. The fact that there is still significant underinvestment in new-builds means greater and greater demand for UK property will need to be fulfilled by a relatively stagnant number of properties.
It is also worth noting that while the politicians tend to play to the crowds as we approach voting day let’s not forget they have all had many years in power in which they could have pushed through their promises on the UK property market. The fact is that property, indeed the family home, is likely to be the biggest investment any individual will ever make in their lifetime. Why would the government of the day look to put the value of a family home in jeopardy?
Despite the fact that the worldwide recession of 2007/8 seems so far away, base rates around the world are still relatively low with the UK rate currently stuck at 0.5%. This means that the UK banking system, and more particularly the mortgage industry, still has access to relatively cheap funding much of which can be passed on to the home buying public. There is still significant interest in the buy to let market across the UK where investors are again taking advantage of relatively low mortgage rates.
Despite many people trying to talk down the UK property market in the short to medium term the economy is recovering, there is still cheap finance available and demand for UK property, both inside London and outside of the capital, never seems to fade for too long.