Annual UK house price growth is projected to slow to around 3% in 2018 and is likely to remain around this level until 2025, according to new analysis from PwC. However, the average UK house price is estimated to rise from £221,000 in 2017 to around £285,000 by 2025 according to PwC’s projections (and increase of 29%). Price growth at this pace means the ratio of house prices to earnings is likely to remain broadly stable, but still at high levels by historical standards.
In London, however, the average house price could drop by nearly 2% in 2018 compared to last year and house price inflation could continue to be negative in 2019.
Richard Snook, senior economist at PwC, commented: “UK house price growth remained resilient in 2017 despite a weakening economic backdrop, but has shown signs of moderating during the first half of 2018, particularly in London. Affordability in the capital has been stretched due to three factors: a high deposit saving hurdle, increased economic uncertainty relating to Brexit acting as a drag on international investment, and reduced numbers of housing transactions due to stamp duty changes.
“However, London house price growth should pick up again from 2020. We project the average price of a London home in 2022 to be £509,000, compared to £141,000 in the North East. This means the large affordability gap between the capital and other UK regions is set to remain.”