View more on these topics

Inflation to wipe out house price growth by 2017

Inflation is expected to drastically erode UK house prices over the next five years, leading to a 3 per cent drop in real price growth, according to Savills World Research.

Savills forecasts an 11.5 per cent rise in property prices in the five years ending 2017. Once measured in real terms however, homeowners are predicted to find themselves in a worse position.

House prices are currently 11 per cent below 2007 levels but, adjusting for inflation, they are 24 per cent lower.

Savills associated director of residential research Neal Hudson says a subdued economy will continue to offer little in the way of drivers for either price falls or growth, but inflationary pressures will persevere.

He says: “In the short term, we expect inflation and not headline house price falls to strip out value as the market goes through a slow and gradual adjustment.

“Though there is significant variation across the capital, average prices in London are now above their previous peak according to Land Registry figures. But even in London, average mainstream values are effectively 9 per cent below 2007 levels after adjustment for inflation. By contrast, in the North East of England nominal prices are 21 per cent below their level five years ago, equivalent to a 32 per cent discount in real terms.”

The strong fundamentals underlying the London market means that Savills is predicting a 24 per cent rise in house prices over the next five years. This is expected to generate a ripple effect which feeds into the “South East uber-towns” such as Sevenoaks and Guildford, before filtering through to the areas popular with second-home owners such as the Midlands.

Hudson says: “Our house price forecasts are set against the backdrop of a low transaction market. This means that house price indices are being calculated by reference only to the part of the market that is trading, the relatively more affluent, equity-rich owner-occupier markets that now dominate activity.”

The volume of transactions is forecast to grow 28 per cent over the next five years, starting with 911 transactions in 2013 and growing to 1,169 in 2017.


Lloyds makes £583m loss with additional £1bn PPI provision

Lloyds Banking Group has made a pre-tax loss of £583m in the third quarter of 2012, after setting aside a further £1bn provision for payment protection insurance misselling. The loss represents an improvement on the £3.9bn loss it made in the same period in 2011, when it set aside £3.2bn for PPI claims. The provision […]

Case study: Getting risk right in retirement income

The problem: The client is approaching retirement with a collection of defined contribution and personal pension funds. He is looking to convert his savings into retirement income but is concerned about the effects of inflation but is wary of taking on too much risk himself. What are his options? The solution: Britain’s baby-boomers are faced […]

FundsNetwork to power FE investment platform

Research firm FE has appointed Fidelity FundsNetwork to power an execution-only platform. The deal will see FundsNetwork provide custody, dealing and administration service for FE Trustnet. FundsNetwork deputy head Paul Richards says: “We believe that FE Trustnet is uniquely placed to take advantage of this new opportunity. Their selection of FundsNetwork is testament to the […]

CML 2012: Martin Wheatley warns lenders must change one-size-fits-all approach

FSA chief-executive designate Martin Wheatley has warned large lenders that have built a one-size-fits-all approach to customers must change their processes. Speaking at the Council of Mortgage Lenders’ annual conference today, Wheatley says the mortgage market review will bring significant changes. He said: “Larger lenders that built effectively a one-size-fits-all lending machine will have to […]

Life begins at…

By Fiona Holmes, proposition communications manager Having reached a certain age (it’s the new 40 by the way), I’m having to come to terms with the fact that my peers and I aren’t as immune from illness or death as we’d like to think. That’s the problem with 30 being the new 20 and 40 […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm