Savills improved forecasts of the UK property market

Average real estate prices in the UK will grow by 3.5% this year and 18.1% over five years, according to the latest forecast from real estate group Savills .

The result is an extraordinary activity that is observed in the property market in the UK, Savills has revised its forecast for the prospects of the UK property market and real estate market of London.

So, a luxury property in the heart of London, which for five years has not changed in price, is now more expensive at a pace that growth this year may reach 6% , in contrast to zero of the initial forecast given by the company.

The combination of three key factors – government intervention in the market, which has resulted in a large infusion of funds in the construction industry, increasing consumer confidence and lower interest rates on mortgage loans – all of that has given the irreversible positive changes in the market.

The revised forecast for this year indicates that average prices in the UK will grow by 3.5% against the original estimate of 0.5% . This means that the average price in 2015 will exceed the peak price that was in 2007, though of course, there will be significant regional and local variations. Even if we consider price adjustment for inflation, still the prices will rise approximately 2.3% each year for the next 5 years.

The new government initiative “Help to Buy” significantly more progressive programs made earlier, because it covers not just first-time buyers into the housing. The government places great hopes on this scheme in the context of its influence on the secondary housing market and secondary buyers, because it is the most vulnerable part of the market today and as a result of entering the program “Help to Buy”, the government expects an additional 400,000 transactions over the next three years. Today, the level of this market is still 24% lower than before the crisis.

It is noteworthy that the increase in stamp duty for properties more expensive than £2 million, has not slowed the real estate market of London. The first six months of 2013 showed that the taxation of luxury housing soon became a political bargaining chip. Even after the increase, London remains the most profitable investment in luxury real estate at the cost of maintaining such property.

According to forecasts from Savills, London will remain so in the future. For investors around the world London is a kind of safe Harbor. Those investors who have already become owners of real estate in London, under any circumstances, do not want to take their money out of the market.

® Helen Entree. 21.07.2013