House price increases across the UK will outperform those in London in 2015 for the first time in six years, housing analysts predict.
The Centre for Economics and Business Research (CEBR) says it expects UK house prices generally to rise by 1.5% this year, while values in London fall by 3.6% following “years of over-performance”, the first time since 2009 that prices nationwide have risen faster than in the capital.
The predicted dip in London will not last for long, however, and by next year property values are expected to rise by 2.7% in the capital and 2.3% across the UK.
The CEBR said the London market tends to be particularly affected by the uncertainty of a general election, but that longer term, underlying factors such as economic growth and a lack of housing supply will push prices upwards.
Nina Skero, a CEBR economist and the author of the report, said: “Outside of London, the outlook for house prices this year has improved after a few months when the market appeared to be coming off the boil. December’s stamp duty changes, as well as rising household incomes, are lifting prices in many parts of the UK.
“In London, however, we expect prices to decline by 3.6%, driven by a significant weakening at the prime end of the market. A potential mansion tax, reduced overseas interest and hefty new stamp duty rates have hit demand for high value property.”
In January, the CEBR said that UK house prices would fall by 0.6% this year but it has revised up its prediction, saying changes to stamp duty in December, which made it cheaper for the most homebuyers liable to pay it, have been felt sooner than expected.
As the housing market recovered in 2014, house prices in London rose by 17.4%, while property values across the UK generally increased by 10%.
By the end of 2014, experts started to report a more evenly balanced housing market across the UK with price rises rippling out from London to other areas as buyers started to look elsewhere.
There was also a growing mood of caution as tougher industry-wide mortgage-lending rules came into effect and househunters became less willing to meet asking prices.
Cebr said the strength of sterling against the euro, concerns about the impact of a possible mansion tax and heftier stamp duty rates on high-end London properties had hit demand from overseas buyers in the capital.
It said that fewer new buyer enquiries and properties taking longer to sell also indicate that prices are set to edge down in London.
A decline in overseas interest in UK property would be much less strongly felt outside London, the CEBR said. At the same time, most home buyers have benefited from the recent stamp duty changes and an improving labour market.