"Sales volumes have been falling in south eastern England and are down 16% in London since 2014. However, first time buyer purchases have been taking a growing share of sales."
Although first-time buyer numbers have fallen by 10% in London over the last three years as affordability pressures limit access to the market, Hometrack predicts numbers to grow in regional housing markets where affordability is more attractive.
Regional markets are also expected to offset weak house price growth in London, and could register house price rises of up to 25% over the next 2-3 years, Hometrack says.
The likes of Manchester, Birmingham and Glasgow have seen market activity increase and this has delivered above average price growth of 6-8% for the last 12 months.
A year ago Hometrack was at the optimistic end of forecasts for house prices in 2017 projecting an increase of 4% on the basis of a continued pick-up in regional housing markets offsetting weak price growth in London.
Twelve months on, the firm says it expects 2018 to follow a similar pattern with the UK’s top 20 cities forecast to register house price growth of 5% next year. For the UK as a whole Hometrack predicts house prices will increase by 3%.
Richard Donnell, Insight Director at Hometrack, commented: “Housing sales have been stuck at 1.2m for the last 3 years and we don’t expect this to change over 2018. Sales volumes have been falling in south eastern England and are down 16% in London since 2014. However, first time buyer purchases have been taking a growing share of sales.
“We are currently ‘half way’ through the current housing cycle that started in central London and is now spreading further afield as the economy grows and mortgage rates remain low. London house prices are up 70% since 2009 but affordability levels are stretched to an all-time high (14x earnings) with sales volumes down and house price growth (+2.9%) failing to keep pace with inflation.
"London is facing a drawn-out period where house prices and earnings need to re-align - we expect the rate of house price inflation to remain in low single digits over the course of 2018 with prices falling in real terms."
