While we all have our own views on the direction of property prices and rentals, it is always with keen interest that we listen to other market commentators who have substantially bigger research resources than we do. Savills have a particularly strong and successful history of forecasting and their research makes for good reading.
Please see; http://pdf.euro.savills.co.uk/residential-property-focus-uk/residential-property-focus-q3-14.pdf which was recently published.
A few of the interesting facts we found within the document are:
- There are 8.9 million mortgaged owner occupiers, there are 8.1 million owner occupiers with no mortgage bill whatsoever.
- Expected base rates of c2.5%, will mean an increase of £20 billion in the total amount of mortgage interest paid
- The growth shown by the mainstream market indices has been stronger in the first six months of 2014 than Savills expected.
- There is more capacity for price growth in other parts of the UK than London, though the timing will be dependent on the regional pattern of economic growth. Over the period of our forecasts, markets in the South of England are expected to be the strongest performers, with the markets of the Midlands and the North having the potential to outperform these areas subsequently as has been the case in other market cycles.
The 5 year price forecast for the East Midlands is 21% and for the East of England is 31%, for comparison London is forecast to be 24%.
In our (RPG) opinion, the London market has seen its surge (not bubble) and now it is the chance for the “other regions”. We believe areas around Rutland, Leicestershire, Northamptonshire and over into Cambridgeshire all represent attractive areas for residential investment over the next 5 years +.
Remember these figures shown are capital growth forecasts, not total return figures including rental payments. As such, if one is able to secure a rental yield of c 6-8% (still achievable in the regional markets) then the total return over 5 years would seem to be particularly strong compared to other asset classes.