Cushman & Wakefield’s Residential Aggregator shows that at the beginning of the year, top market commentators predicted capital growth across London of between 7-12% in 2014.
Despite upwards revisions during the final months of the year—lifting growth estimates to around 15%—all commentators undershot annual growth, which reached 18% according to Nationwide.
This highlights the difficulty with which one can predict house price growth, especially in a sentiment-led market. With this in mind, looking to the year ahead commentators are expecting a much more conservative year of growth in London. At present predictions range from 0-5.5% for 2015; a substantial reduction in growth compared with recent years. Reviewing the future development pipeline of product entering the market, which is focuses on less prime locations, I predict London’s average capital growth to be at the higher end of these predictions at circa 4.5%.
What do we expect 2015 to look like?
The election is the key influencing factor on market activity this year. We anticipate that the market will have three distinct phases this year. There will be an initial period of strong activity, as deals are done before the election. This will be followed by a pause for breath over the election period, which will be followed by a flurry of activity before year end. As mentioned, the election will cause the market to pause during the summer. However, it is worth noting that a pause in activity should not necessarily be confused with a decline in values.
The primary concern around the election is the potential for an extended period of market inactivity, caused by the necessity for additional rounds of voting. This will stymie activity levels and would likely lead to a decline in prices.
Further to the election there are a few other key elements to watch for 2015 include the continued rise in build costs; forecast to grow by 5% this year, the return of widespread wage growth and lower energy costs and the impact of events in Europe.
Jack Simmons is head of UK residential development and investment, Cushman & Wakefield