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Over the next five years property prices in the UK are expected to increase by nearly a fifth, with forecasts ranging from a rise of 21.6% in the South East of England to a 12% increase in the North East of England.
According to the research by estate agent Savills, property prices are forecast to rise 5% next year, but subdue back to a growth rate of 2.5%-3% a year until 2020.
The reason why prices are believed to slow down after next year is because of the eventual rise in interest rates and tighter mortgage rules.
Savills said that “any combination of house price growth or high mortgage rates could leave affordability looking stretched”.
The average house price is expected to increase by more than £33,000 by 2020, with house prices in the South East, the South West, the East of England and the Midlands forecast to rise at a faster rate compared to London.
Lucian Cook, director of residential research at Savills, commented: “Over the next five years, the economic recovery should spread geographically.
“This is likely to result in much less London-centric price growth than we have become accustomed to.”
“[Price] growth is likely to pushed away from the centre of london towards outer london and the suburbs,” said Mr Cook.
House prices have been increasing steadily over the past year. According to Halifax, prices increased 2.8% in the three months to October and rose 1 percent in the past month. The average price of a house in the UK is now £205,240, about 2.7% higher than the pre-recession peak.
Despite price growth in the housing market benefiting current homeowners, it creates a barrier to new buyers.
“Large numbers of older households have benefited from over two decades of house price growth and many now hold substantial amounts of housing equity,” said Neal Hudson of Savills Research.
“This creates an incentive to preserve house prices at existing levels or higher. Unfortunately, those high house prices also create a barrier to new buyers, particularly through the size of deposit they need to obtain. Rather than creating a nation of homeownership, it appears we have created a generation (or two) of homeowners.”