UK property forecast more positive for 2020
Conservative election victory sets the scene for greater certainty and robust economic growth over the next five years, despite Brexit
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The outlook for the UK property markets is more positive than it's been since before the 2016 EU referendum. Last week's general election secured a stable Conservative majority for the next five years, bringing an end to the uncertainty that's characterized the UK economy for the last three years and restoring the confidence of investors.
With no further delays anticipated for Britain's departure from the European Union on January 31, 2020 is expected to be a year of gradual recovery as investors and businesses adjust to the new landscape. This is set to accelerate from the end of the year as greater economic and political certainty instill.
Increases in consumer spending, government investment and wage growth above inflation are set to drive up house prices and new build activity across all UK regions. For overseas property buyers, now is the opportune time to invest in the recovering UK residential market to enjoy the greatest returns.
UK residential forecast
Research by Jones Lang LaSalle (JLL) forecasts moderate growth in the housing markets in 2020, leading to more rapid growth in the following years. Average house prices are predicted to grow by one percent per annum in 2020, rising to four percent by 2022. Transaction levels are expected to steadily improve to more than 1.3 million per year, with new housing starts taking slightly longer to recover as some developers remain cautious at first.
The outlook is bright for the UK as a whole, but the strongest performing regions are expected to be perennial favorite London, the East of England, Yorkshire & The Humber and North West England. Continuing urban migration will see the highest demand for property in towns and cities, which are set for population growth of 2.5 million by 2024. This density will increase demand for shared living spaces for professionals, students and families.
The UK rental sector will also see steady growth in the medium term, fueled by the trend for city living and more families waiting until their 30s to have children, delaying the purchase of their first home. JLL predicts rental growth of 2 to 2.5 percent per year for the UK as a whole.
London residential forecast
One of the world's fastest growing cities, London weathered the years of uncertainty better than predicted and is set for a resurgence of economic growth over the next five years. An expanding tech hub and top seven global city for talent, London attracts professionals and students from the world over, with population growth forecast at 100,000 every year. This means demand for well-connected property in London will continue to outstrip supply, but ongoing urban regeneration and an increase in new build activity will provide plenty of attractive opportunities for investors.
JLL expects modest growth of one to two percent for London property prices in 2020 as confidence slowly returns to the markets, but this is set to accelerate in the next few years up to 4.5 percent. Similar growth is expected in rental prices, driven by real wage growth, strong demand for multifamily homes and the lack of affordable properties in the average buyer's price range.
London's diverse markets mean investors need to choose locations with care. Growth is expected to be slower in prime Central London than in some less expensive outlying districts, especially those served by the forthcoming Crossrail Elizabeth Line (currently scheduled to begin service in 2021). While many station areas have already seen their price growth spurt, others are marked for significant growth in the next few years as Crossrail approaches, particularly Whitechapel in Zone 2.