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Savills revises upwards UK house price forecast

House prices in the UK are expected to rise by 9.5 per cent during the year, with particularly strong growth in London and the south-east.Estate agent Savills has revised upwards its initial estimate of 6.5 per cent, with four per cent growth predicted for next year and 25.7 per cent overall in the five years to the end of 2018 - up slightly from the original forecast of 25.2 per cent.The most notable revisions have been made to the forecasts for mainstream London and, to a lesser degree, the markets in the south and east of England.In London and the south-east, the rise in house prices has significantly exceeded original forecasts, and all of the markets are expected to end the year in double digits.While price growth remains high in these areas, there are signs that demand is weakening, with evidence of a change of sentiment in the capital.Full-year growth in London is expected to be 15 per cent - significantly higher than the 8.5 per cent originally forecast. The five-year growth prediction remains unchanged but affordability will become stretched as and when interest rates rise. Originally, the estate agent forecast markets in the south and south-east to achieve slightly higher growth than London, but they have so far registered smaller increases than the capital. Nevertheless, they are expected to end the year in double-digit figures and, in the long term, growth is expected to be higher than in London."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," said Lucian Cook, Savills UK head of residential research."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." 

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