6th November 2015
Property is set to become even more unaffordable in the next five years, with prices rising as much as two-and-a-half times the average salary.
Savills estate agents has predicted average property prices will increase 17% by the end of 2020, up from £195,733 to £229,007 – a rise of more than £33,000.
However, those hoping to buy in London will see even larger increases. Prices in the capital will rise at a lower rate of 15.3% but this is a larger cash sum owing to the high house prices in London – meaning buyers will have to find another £70,000 if they want to purchase a home.
The average price of a property in London is £443,399 at present and will increase £67,840 to £511,239, according to Savills.
The largest percentage increases will be seen in the East and South East, seeing 21% and 21.6% rises respectively.
However, all the increases will depend on how quickly interest rates rise said Lucian Cook, head of Savills residential research.
‘If rates rise too quickly mainstream house price growth will be quickly curtailed,’ he said.
‘On the flipside, if rates remain low for too long, there is a risk that prices will rise too far, creating affordability issues further down the line when they do eventually rise.’
Although he added that stricter mortgage regulation which go someway to preventing an affordability crisis.
‘Continued record low interest rates will support house price growth because servicing a mortgage remains affordable,’ he said.
‘The timing of the first and subsequent rate rises is therefore critical to market sentiment.’