Skip Ribbon Commands
Skip to main content

News Release

London

London will defy the gloom surrounding the UK housing market with prime areas and the best new developments set to see 4% growth during 2012 and 6% in 2013

Say Jones Lang LaSalle in 2012 residential market forecast


London, 17th November 2011 - Greater London will see prices grow by 2% over the next year, in contrast to the 0% seen across the UK as a whole, according to Jones Lang LaSalle’s 2012 residential market forecasts released this week. The accompanying report predicts that the stronger economy in the capital, combined with on-going international demand, will keep prices robust.

Neil Chegwidden, Residential Research Director at Jones Lang LaSalle commented: “London, particularly more central areas, is increasingly seen by international investors as a safe haven in a turbulent world. Combined with a stronger economy than the wider UK, which is supporting domestic demand, this will ensure that prices continue to rise in 2012.”

The gap between London and the remainder of the UK is likely to grow over the next few years, with price growth 4% and 7% forecast for 2013 and 2014 respectively, and higher rates expected for prime locations and the best new central London development schemes. Low levels of development, far below anticipated need, will continue to provide a boost to prices.

Meanwhile, Northern and Midland regions will have a much more difficult year with average prices dropping by 2%. Higher levels of unemployment, weaker job creation and the effect of public sector redundancies will weigh heavier on these regions, although there will be “bright spots” such as York and parts of Manchester and Cheshire.

Jones Lang LaSalle also believes that London is at the forefront of fundamental shifts occurring in the housing market that are arguably more important than price changes.
Jon Neale, Residential Research Director at Jones Lang LaSalle, said: “The private rented sector in the capital has grown rapidly over the past few years, and there are now around 150,000 more households renting from private landlords than before the financial crisis.”

“By 2015/16, there could be more private tenants in London than people with mortgages.”

There are many reasons for this, but paramount are the on-going problems in the mortgage market. Increased regulation, combined with problems with funding, suggest that mortgage volumes will remain much lower than has been typical historically.

Neale added: “The Eurozone crisis, combined with a stricter global regulatory environment, indicates that the mortgage market will not rapidly return to the conditions seen for much of the twenty years leading to the financial crisis.”

First-time buyers will continue to struggle unless they have access to a significant deposit. While higher loan-to-value mortgages may become more widely available, they are likely to remain far more expensive than other products.

The increasing demand for the sector, and relatively limited supply, indicates that rents will continue to rise in the near term, particularly in London where growth is most marked.

The combination of the growth of the rental sector, a limited mortgage market and the concentration of owner-occupation among older, less mobile households suggests that transactions throughout the housing market will remain at a relatively low level for the foreseeable future.

Development volumes across the country will remain low as a result, but better conditions in London will result in a stronger bounceback for house building in the capital.