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London to lead recovery in house prices with 16.5% growth by 2021

London is to lead the UK house price recovery with 16.5% cumulative growth between now and the end of 2020, according to the latest research by Strutt & Parker.

The estate agent yesterday published its forecast for the property market in 2017 and beyond, estimating that over the next five years, Greater London is set to experience the greatest levels of price growth, followed by the South East and the East of England, with all producing double digit growth at 16.5%, 16% and 14.2%, respectively.

The ongoing uncertainty around the UK’s exit from the EU will slow down market activity across the UK next year, but the company expect the continued weight of international money seeking the UK’s ‘safe haven’ status to help ensure investor interest for property in London, particularly prime central areas, remains strong.

However, with so much uncertainty in the market, Strutt & Parker is predicting “flat growth” for house prices in prime central London in 2017 “as a best case scenario”.

“Prime central London has historically been the primary driver of national house price growth but 2016 has seen the capital being outperformed by other locations – most notably the outer metropolitan area of London, and East Anglia. This trend is expected to continue into 2017,” said Stephanie McMahon, Strutt & Parker’s Head of Research.

McMahon explained that the “differing of opinions” between forecasters going into 2017 is an indicator of the uncertainty currently going on in the market, making things far more difficult to predict than usual because of the “high number of upcoming global events”.

“These include the shakeout from the USA presidential election, the Dutch, French and German elections taking place throughout 2017 – and of course Brexit closer to home. Article 50 may or may not be triggered by the end of March 2017 – we just don’t know at the moment and so the potential impact is difficult to call. It is crucial that we view the UK through the prism of global investment stability,” she added.

With so many unknowns, McMahon says it is important that investors go back to looking at the fundamentals of the UK’s property market.

The property analyst continued: “When compared to the rest the world, we have benign corporation tax, mid-level residential property tax, a favourable GMT time zone, we speak in the international business language and have huge depth of markets and skills. As a result, our economy is currently holding up better than perhaps many expected following the EU referendum.

“In 2017, elements to watch will be creeping inflation and the pressure that it puts on goods and services as well as interest rates. It is important that the government quickly addresses the undercurrent of the Brexit voting and encourages growth in the regions.

“The UK must be positioned as a place to business and it’s vital that we remain an ‘open’ economy. Having said this, the UK’s geographic winners and losers are unlikely to change a great deal in 2017, but our ability to attract ‘human capital’ is key.”

 Regional House Price Forecast

5 year compounded

Source: DCLG, Experian

Region (YoY%)

2016 – 2020 inclusive

London

16.5%

South East

16.0%

East of England

14.2%

South West

10.0%

East Midlands

7.6%

West Midlands

6.7%

Yorkshire and the Humber

4.1%

North West

4.2%

North East

2.2%

Wales

4.5%

Scotland

2.7%

Northern Ireland

4.1%

Source: Experian, October 2016

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