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What's in store for the UK's residential market?

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The UK boasts, without a doubt, one of the leading residential property markets in the world. According to a recent report from Jones Lang LaSalle, residential demand over the past year was strongest in Europe and the Middle East, with high-end residential investment growth particularly notable in London.

But what does the future hold for the residential market in the UK? Some of the answers may be found in Knight Frank's recently released UK Residential Forecast & Risk Monitor - Q4 2014. The global property consultancy giant's report assesses the region's residential prospects from 2015 to 2019, looking at the strongest areas of growth as well as the potential sources of market risk.

It makes essential reading for property developers looking to cash in on this prosperous market - here are the main findings from the analysis.

London still leading the way

Knight Frank points out that at this stage last year, it had predicted that the residential upturn that was being witnessed in London would spread further across the region. While this certainly appears to have been realised, London is still leading the way.

According to Knight Frank, its prediction last year that residential market growth in the UK would rise by 7 per cent in 2014 has proven to be accurate. In addition, price growth in London has peaked this year, in line with its forecasts from October 2013.

Prime central London in particular is set to enjoy plenty of price growth. While prices are likely to remain static next year, Knight Frank forecasts cumulative growth of 22.1 per cent by the end of 2019.

In comparison, total growth in prices for the whole of the UK is projected at 18.2 per cent in the same time period.

Meanwhile, rents are also set to pick up across the region in 2015. Knight Frank expects rents in both the UK overall (2.2 per cent) and prime central London (3.5 per cent) to increase next year.

What effect will the General Election have?

According to the report, the 2015 General Election is one of the major events likely to have an impact on the region's residential market next year.

"Looking ahead to 2015, the UK's General Election obviously has the potential to influence the direction of the housing market significantly, especially in central London," wrote Knight Frank's Global Head of Research, Liam Bailey.

"With the polls too close to call, we have not assumed a particular outcome for next year's election."

The report points to several policies that may arise depending on the outcome of the election, and which could affect the housing market. These include, for example, a possible new mansion tax and revised rent caps.

However, politics isn't the only potential source of risk the market may have to contend with in the coming years.

What other risks does the market face?

As part of its report, Knight Frank also looks at the key risks to the regional market in its Risk Monitor. The two standout sources of risk in this year's edition of the Monitor are interest rates and economic activity.

Firstly, Knight Frank notes that interest rates are rising faster than anticipated - with the potential to reach 1 per cent by Q4 2015 and 1.75 per cent by Q4 of the following year. This could obviously put a dampener on activity in the residential market.

Additionally, the possibility of an economic slowdown in the UK could stunt growth in the market, says Knight Frank.

Make sure you have the tools for the job

The report demonstrates that there is promise and risk in equal abundance for the residential property market in the UK. Those looking to step into the market in the coming years should ensure they take advantage of all resources available to navigate it with confidence and clarity.

Software solutions, such as those with property valuation suites, are therefore an ideal tool to rely on in the future ahead.

Date Published: 22 Oct 2014
Category: News

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