Savills forecasts UK price surge of 25.7%

Estate agent Savills expects average UK house prices to rise by a whopping 25.7 per cent over the next five years, up from its original forecast of 25.2 per cent. 

For 2014 alone, Savills has raised its original forecast for house price growth from 6.5 per cent to 9.5 per cent.

The biggest change is in London, where Savills has revised its original forecast from 8.5 per cent to 15 per cent for 2014. Over the next five years, Savills expects London house prices to grow 24.4 per cent.

The South-east, South-west and East of England are all forecast to show double-digit growth in 2014. Notably, all three regions are expected to show stronger growth over five years than London as a flow of buyers continues leave the capital for more affordable housing.

House prices in the South-east are tipped to grow 31.6 per cent, while the South West is expected to grow by 29.9 per cent between 2014 and 2018. 

The East of England is forecast to grow 31.1 per cent during that time.

Savills UK head of residential research Lucian Cook says: “House price growth in the mainstream market has been underpinned by record low interest rates, rising loan-to-income lending and pent-up demand from buyers re-entering the market as the economy and consumer sentiment have improved.

“But these extraordinary rates of house price growth cannot continue in the current, more regulated mortgage environment, particularly in the face of likely interest rate rises.”

Data from the Office for National Statistics, released earlier this month, showed the rate of UK house price inflation slowed slightly in June although prices were still up 10.2 per cent on an annual basis.

But online estate agents Rightmove also released figures this month showing signs of cooling in the London house market after asking prices fell 5.9 per cent in just one month.