The 'Golden Age' of house price growth is over, admits estate agency

The first of the major estate agency research teams to offer a forecast for the 2018 market has kicked off the predictions season in gloomy style, saying “the Gold Age of house prices” has come to an end.

JLL says prices will rise by just one per cent next year, ahead of increases of two and three per cent respectively in 2019 and 2020.

These are far from the annual averages of the 6.9 per cent seen over the past 20 years according to the agency.

The good news for agents is that JLL anticipates transactions will growth from around 1.18m to 1.3m bu 2020.

"This can be viewed as an end to the Golden Age for house prices, or (more realistically) as a return to the pre-1970 era of stability" says Andrew Burrell, JLL's head of economics and forecasting.

In Greater London, house prices are forecast to fall by 1.0 per cent next year before edging up slightly in 2019 and then hitting a 4.0 per cent annual rise in 2022. The news is worse for prime central London, however, as prices are predicted to fall by 3.0 per cent in 2018 before edging back a tiny 0.5 per cent in 2019.

The agency says thanks to the exchange rate, uncertainty in London’s market caused by Brexit may be offset somewhat by demand from overseas investors.

“This does not mean a complete standstill. ... Demographics remain healthy in the UK, while housebuilding has rarely kept pace with demand. In addition, real earnings are expected to recover, if not quite to their past growth rates. The result is a market where affordability will remain low and demand more constrained” explains Burrell.

“There are other headwinds, as ultra-loose UK monetary policy cannot last forever. Rises in policy rates are expected to be slow and gradual, leaving UK market rates well below their pre-GFC norms. But even a small change will increase costs for homeowners and put further pressure on already stretched incomes” he warns. 

Later this week Savills is producing its forecast for 2018.

Meanwhile the Nationwide has produced its index for October, showing the annual rate of house price growth picking up slightly to 2.5 per cent across the UK.