It’s that time of year again, when people guess what’s happening next year. Only, it’s particularly entertaining this year because no one really knows what’s going to happen next week.
Still, most of the UK’s big estate agencies have had a go, looking at house price growth in the UK and abroad, what effect Brexit will have, new trends in the market and how things like interest rates and buy-to-let restrictions will affect the market in 2019 and the next five to 10 years. We picked out some of the highlights so you can get an overall picture of what property industry experts think is going to happen to the value of your flat.
Unbelievably, considering the currrent Brexit chaos, house prices are still growing in the UK. Not by much, though; only 0.3 per cent in November, up 1.4 per cent from the start of the year according to Nationwide.
Next year, JLL says they expect an initial slump at the beginning of next year, showing 1 per cent growth in the first six months, then picking up in the second half to make 1.5 per cent growth by the end of the year. This should grow to 11 per cent in the next five years, says Adam Challis, head of UK Residential Research. “With UK earnings growth set to return to a more normal rate of 4 per cent per annum by 2021, real wage growth and more modest property price increases will unlock transactions that have been hampered by a lack of affordability.”
Strutt & Parker is even more optimistic, forecasting 2.5 per cent growth for 2019 and five year growth of 18 per cent, though they caveat this heavily. “Beyond 2019, it is extremely difficult to forecast the market with any certainty and we would expect some bounce back once more stability has returned. The fundamentals of the UK economy remain broadly positive, with sentiment remaining cautious,” says Stephanie McMahon, head of research at Strutt & Parker. Its best case scenario for London in 2019 is 2 per cent, rising to 20 per cent in five years, with a downside risk of minus 5 per cent.
Savills is more cautious, sticking to 1.5 per cent in 2019, rising to 14.8 per cent in five years. Should Brexit be miraculously solved, London and the south east will be the first to reap rewards from the new sense of certainty.
Interest rates could be another spanner in the works. Following the increase from 0.5 per cent to 0.75 per cent in August, Strutt & Parker’s forecast says it expects interest rates to rise gradually in the next few years, reaching 2 per cent by 2021, increasing the cost of mortgages to many households.
“Assuming that – as most economic forecasters are suggesting – we avoid a full-blown recession, then interest rates are probably the bigger of the two variables,” says Lucan Cook, director of research at Savills, the other variable being Brexit, of course.
Places to invest
In the London, this is fairly straightforward. CBRE’s Hot 100 report using Land Registry and Rightmove data shows that Islington was London’s top performing borough for house price growth last year, recording a 7 per cent increase. Redbridge and Richmond come in joint second with growth of 5.7 per cent. Not far behind are suburban, more ‘affordable’ boroughs like Newham, Ealing and Merton.
Knight Frank’s Prime Global Forecast 2019 says that price growth in luxury locations is still relatively low, thanks to a cocktail of regulations, Brexit, the rising cost of finance, and even over-supply in some cities. Its ones to watch next year are Madrid, Berlin and Paris, all with predicted growth of 6 per cent. Prices in Hong Kong, where to loan-to-value ratios could be relaxed, are predicted to fall by 10 per cent, and Mumbai prices could fall by 5 per cent due to a developer tax on unsold inventory.
Its main advice, however, is to follow the tech-start ups and invest in non-traditional residential like retirement communities, student accommodation and build-to-rent, which are set to outperform the wider market.
Knight Frank also predicts 2019 will be the year San Francisco, Chicago, Dallas, Beijing and Shanghai join the ultra-prime cities club.