While the ripple effect from London has been slow to arrive thus far, we expect the number of buyers moving from London to increase as they take advantage of comparatively affordable prices. Since the downturn, the value gap between London and the rest of the country has widened to an all time high. By 2017 however we expect house price growth in the West Midlands to outperform London as the market moves into the next stage of its cycle.
Some buyers though, particularly those looking to upsize, will continue to be constrained by mortgage regulation and are likely to be wary of future interest rate rises. This is expected to suppress house price growth over the next five years, particularly in the lower value markets, where buyers are more reliant on mortgage finance and realistic pricing of stock remains crucial.
With an election approaching, there is also a slight threat to the top end of the market given that taxation of high value properties is high on the political agenda. Stamp duty has already increased for property over £1million and if there are any further changes we risk a period of sobriety.
Overall, our outlook for the prime Midlands and North remains positive, with average prices forecast to grow by 20.4% over five years, assuming no further changes to the taxation of high value homes takes place.
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