The economic recovery is accelerating and broadening. We forecast UK GDP to increase by 2.6% in 2014 and maintain this rate over the medium term. This is higher than the long term average and better than most European countries. All UK regions will benefit from higher growth. The Bank of England, however, is unlikely to increase interest rates until 2015.
We continue to be bullish about London house prices, and expect growth to accelerate. All the sub-markets are forecast to see average house price growth of around 7% per year, over the next few years. Similarly, house prices in the major UK cities are also forecast to rise sharply, growing by around 5% per year on average.
Private rental growth is expected to lag future house price rises. Improvements in housing market sentiment, mortgage availability and affordability pressures will limit the scope for further rises, especially in London. Nevertheless, fast rising prices will preclude many tenants from ownership and help underpin growing demand for the private rented sector (PRS). This will contribute to an increase in new housing starts which are expected to reach 200,000 a year by 2018.
Source : DTZ (Groupe UGL)