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London house prices to suffer as north-south divide narrows

Reversal of decades-long trend will see capital’s prices grow by lowest of all UK regions. The house price divide between London and the rest of the UK will narrow by up to a fifth over the next five years, a report from estate agent Savills suggests.
In the North West property prices are predicted to go up by 21.6% over five years, with most of the rest of the country set for double digit growth, while London prices bear the brunt of Brexit angst.
The Midlands, driven by the increasing popularity of Birmingham; Yorkshire and Humberside; Scotland and Wales “all also have the capacity for mortgage borrowing to increase relative to incomes and so are expected to experience strong double-digit price growth” says Homes and Property.
By contrast, property prices in London and the South East are only expected to increase 4.5% and 9.3%, respectively.
MoneyWise says the traditional North-South divide “will be turned on its head” in the years ahead.
Overall, average house prices in the UK are expected to rise by 14.8% between 2019 and 2024, in line with rises in average income.
The narrowing of the north-south divide “reverses the trend of previous decades” says The Guardian, with London house prices rising by a whopping 72% over the past ten years, compared to just 1.9% in the North over the same period.
Savills says that while Brexit will continue to hit prices, particularly in London and its commuter belt, local market affordability is expected to affect price growth over the longer term.
Stricter mortgage lending rules introduced in the aftermath of the 2008 financial crisis will limit price increases but would also protect the market from a crash, it added.
Lucian Cook, Savills head of residential research, says: “Brexit angst is a major factor for market sentiment right now, particularly in London, but it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.”
“The return to growth in London overall will take far longer than expected,” says The Guardian, “with buyers struggling to afford purchases and interest rate rises expected to occur earlier than previously assumed”.
However, London’s prime market, comprising its most expensive properties, is expected to see a stronger upswing in the years to 2023, with 12.4% price growth predicted for pricey central London properties.
Savills said this was because high-end buyers are more likely to be paying cash and so are unaffected by mortgage regulation.
In recent years these buyers have been put off by increased property taxation at the top of the market and, more recently, by Brexit uncertainty.
“Five-year forecasts must be treated with caution,” warns the BBC, “particularly in the housing market, owing to the variety of events that can affect the UK economy and the sector, down to a local level.
The past five years have seen relatively little activity in the housing market.
On Thursday, the Nationwide Building Society said that many homeowners were choosing to stay put, leading to relatively few properties being placed on the market.

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