House Prices To Beat Inflation

Inflation-beating house price growth will continue to be a feature of the coming decade, though at a lower rate than seen over the past ten years, according to new analysis from Savills Research.

The property consultancy forecasts that demand will be sustained by stock shortages, but price growth will be constrained by more limited access to mortgage finance. It forecasts 40% inflation-adjusted growth in the mainstream market over the next ten years, much more in line with the long term average.

"We expect to see an ongoing pattern of much more sober lending in the next decade, a factor that will clearly set the next ten years apart from the pre-credit crunch Noughties which saw very high inflation-adjusted growth in comparison to the historic norm," said Lucian Cook, Director of Savills Research.


"The legacy of the Noughties will be a residential market split - possibly irrevocably - between the equity haves and have nots.

"A regionalised market recovery is now inevitable with a ripple effect rolling out from the prime markets of London and the South East. Our forecast anticipates sustained house price growth in the equity rich, prime hotspots from 2011 onwards, with a significant lag in areas blighted by low levels of equity, high unemployment levels and the prospect of very slow economic recovery."

The company also forecasts a very different geographical pattern of growth compared to the Noughties and a reversal of fortune in some areas that have outperformed the average over the past ten years (see map below). Most notably, the areas showing the highest levels of growth did not include the majority of Central and South-East England, in part because they had seen the strongest uplift in the early part of the 1997-2007 growth period.

(CD/GK)