UK house prices set to drop by 1% overall in 2015 and by 2.6% in London says new report

6th October 2014

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After growing by 7.8% this year, average house prices across the UK will dip by 0.8% in 2015 a new report from the Centre for Economics and Business Research (Cebr) has warned.

The think-tank believes that the British market has hit a turning point and that the anticipated decline will be even more dramatic in London where it expects that the 17.1% growth witnessed this year will be followed by a 2.6% contraction in 2015 as demand, both domestic and overseas, declines.

In the capital, Cebr’s research highlighted that leading indicators, including falling new buyer enquiries and properties staying on the market for longer before they sell, already point to price declines. In addition, it noted that affordability has become such an issue in London that prospective buyers are starting to baulk at high prices.

Compounding this, it said, is a decline in overseas demand as London property prices are now above their pre-crisis peaks in US dollar and euro terms – making it less attractive for overseas investors. In addition, UK property is increasingly looking like a less safe investment it added.

The uncertainty over the next election and UK governance following the fallout from the Scottish independence referendum and the risk of an uncertain relationship with the EU make the UK appear inherently more unstable than in the past, while the proposed mansion tax raises the prospect of expropriation of wealth in the future – something which will deter overseas investment in the UK urged the report.

It added the Mortgage Market Review (MMR) guidance, introduced in April, has led to a weaker outlook for mortgage approval growth as eligibility criteria have become tougher which should curb demand for property in the short term.

Scott Corfe, head of macroeconomics at Cebr and main author of the report, said: “Tougher mortgage eligibility criteria, high deposit requirements and concerns about future rate rises are starting to take steam out of the UK housing market. But the risks should not be exaggerated – the price falls forecast for next year will be modest and we shouldn’t be too worried about this – we are not anticipating a crash. The market is adjusting after getting ahead of itself at the start of 2014.”

5 thoughts on “UK house prices set to drop by 1% overall in 2015 and by 2.6% in London says new report”

  1. Jer says:

    “we are not anticipating a crash”
    No-one ever does :)

  2. David Lilley says:

    Katheryn Hopkins, Property Correspondent of the Times, wrote in the Saturday edition that “Across the capital, the average reduction was 7%……Properties worth more thn £5m suffered the biggest average reduction, averging 10%.”

    1. Noo 2 Economics says:

      Well David, look at how the GBP is doing, could be all those foreign investors aren’t too interested in buying an investment in a foreign currency which is depreciating.
      I always thought the London market was more to do with foreign investment via cash purchases rather than domestic purchases financed via mortgage.

      Sterling’s fall may well do more damage/correct/rebalance the London market than any amount of regulation/monetary tightening via MMR/interest rate rises.

      1. David Lilley says:

        Noo,
        The Times article actually stated 8%. If true it should have been front page news and not page 20. I hate having to work with duff data.
        When the right wing mob took control in Kiev and immediately voted to ban the Russian language they invited trouble in Crimea and the East. When the Rouble fell some 30% and the Russian stock market fell similarly some $260b left Russia and rushed into Blue chips and property in the West. Russians now own 9% of London property depending what you read. The increase in London prices resulted in an increase in the average house price and buyers again had no choice but to jump in before prices were unaffordable. If only they had understood the exceptional circumstances.
        Sterling has fallen from $1.71 to $1.61 but has it fallen against a basket of currencies or is it just the $ apprieciating as it is the new gold.
        It is sad that Shaun has returned to NAYME.

        1. Noo 2 Economics says:

          Hi David,
          I posted on Shaun’s blog here a few months ago I felt the £ was markedly overvalued against the $ and it should be trading circa $1.50 – $1.60 which is where it is now more or less.

          So was I right and it was overvalued then or was I wrong and it’s under valued now? The pace of the fall smacked to me of traders unwinding positions having bid the £ up. Although it’s fallen the £ doesn’t seem to have had such a dramatic fall against the other currencies as it has against the $ so maybe your suggestion is right.

          We’ve just got to go to 2 places for quality analysis and commentary now – NAYE and here for Simon Ward.

          I notice Simon is beginning to grasp at straws to explain why his prediction of continuing firm global growth through late 2014 has not materialised. As he has been so accurate in the past I will give him considerable leeway before considering ceasing reading him.

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