The leading economic think-tank expects a home in London to cost £383,000 this year. Even though Cebr expects house price growth in London to be slower this year than in 2012, when the decade ends they forecast house prices in the capital will be over 30% higher than in 2013.
House price rises will be driven by London’s comparatively bright economic prospects. The capital enjoys: strong emerging market links; a high concentration of services firms; and a relatively low reliance on the public sector. This last feature of the London economy will shield the capital from the worst effects of public spending cutbacks. Finally, high rates of immigration to the capital bring a range of skills, languages and international commercial links which are forecast to fuel London’s economic and house price growth.
Economic growth in the capital is expected to be stronger than in the UK as a whole in the medium-term. Overall, the fundamentals of London’s economy will be enough to push house prices up over £500,000 by the close of the decade.
Outside the capital, there is a clear “North-South Divide” when it comes to house prices.
Between 2013 and 2018, we forecast that house prices will rise by 24.8% and 25.7% in the South East and East of England, respectively.
By contrast, house prices in Northern Ireland and the North East are forecast to grow by only 6.0% and 2.3% over the same period. Weak Northern Irish growth is due to the province’s close economic ties to the Irish Republic, where residential property prices are far below the pre-crisis peak. Overall, relatively bleak economic growth prospects in the North and Midlands will feed through into comparatively slow house price rises.
Daniel Solomon, Cebr Economist and main author of the report, said:
"Before the decade is out, we predict the price of the average home in London will reach £500,000. House price rises will be driven by London’s comparatively rosy economic growth prospects, buoyed by IT, business and professional services."
"Nevertheless, house price growth in London will remain notably slower than in the boom years before the financial crisis."
