Cost-of-living crisis slows down housing price growth, tenancy duration increases and more skyscrapers in outer London

Cost-of-living crisis slows down housing price growth

The latest Goodlord Rental Index reports that rents rose by 1% in most of the UK.?Inflationary pressures, however, also increased tenant salaries, which may counter some of the increase in prices.

At the same time rising costs of living probably played a role in the slowing down of house price growth. Looking forward, Capital Economics forecasts a 5% drop in house prices over 2023 and 2024, which will wipe out 20% of the increase since the outset of the pandemic.

Concurrently, the increase in the Bank of England base rate will affect mortgage rate, which on average are predicted to increase to 3.2%?from 1.6% by year’s?end.?A. Wishart of Capital Economics noted this is “the sharpest rise in mortgage rates since 1990”. The housing market is expected to cool down as a result based on historical precedence.?Capital Economics further predicts that?although house prices will keep increasing until the end of 2022 then they will decline. This is, however, in contrast to a somewhat?different prediction by Savills which forecasts that house prices will keep growing, though on a declining rate, between 2022 and 2026.

Tenants stay for longer in rented homes

The average length of tenancy increased?from 21 to 23 months between February to March this year - a 10% increase - a?recent published research ?finds. The March Private Rented Sector Report attributes this to increased rental prices and a limited supply. Pressure on the supply for rental properties is also exacerbated by the tendency of landlords lately to sell rather than rent, as evidenced by the fact that the UK average number of landlords that sought to sell rather than continue renting went from 2 to 3 per member branch between February to March this year, according to the same research.

Skyscraper boom in outer London?

Since inner London will not grow enough to meet the housing needs, outer London will! There are now 228 tall buildings in the pipeline in outer London, up 6 per cent from 216 last year,?as we read in?Evening Standard .?An annual survey shows that a record 98 tall buildings were given the green light by local authorities, up by more than a third on 2020, with 56% of those in outer London boroughs.

By contrast, the pipeline in inner London fell year-on-year to 355 tall buildings. As a result, outer London boroughs are now accounting for 39% of the tall-building pipeline, up from 37% in 2020 and 36 per cent in 2019.

Is this beginning of a new urbanisation era for outer London?

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