Demand to ripple out

The outlook for the South Wales market is mixed. Positive aspects include the continuing economic recovery and an increase in buyer confidence. We expect the London market to cool off, which is often a cue for activity, and prices in the other UK regions to pick up as demand ripples out. In addition, the recent changes to stamp duty may provide a small boost to the Welsh market.

In the cities of South Wales demand is expected to be particularly strong as the area is set to grow its population faster than the rest of the country. Table 1 shows the Welsh Government’s household projections.

Source: Welsh Government, 2011-based household projections

Average household size is on a downward trend so extra demand may be highest for one and two-bedroom properties. On the negative side, reforms to mortgage lending criteria may lead to a reduction in lending. The mainstream markets in Wales are dependent on mortgage finance so this may be a drag on price growth. Some areas saw strong rises through 2014 so the scope for future growth is more limited.

Source: Savills Research 
NB: These forecasts apply to average prices in the second hand market. New build values may not move at the same rate

Overall, we expect growth in second hand prices for Wales of more than 15% over the five-year period from 2015 to 2019 – below the UK average but higher than London. Given Cardiff is the economic centre of the region, it is best placed to outperform other locations.