housing market forecasts - hamptons international market forecasts autumn 2013

www.hamptons.co.uk

Housing Market Forecasts

Beyond your expectations

Hamptons International ResearchAutumn 2013

Autumn 2013Housing Market Forecasts

www.hamptons.co.uk© Hamptons International 2013

North West2014 Forecast: 4%5 Year Growth: 21%Average Price 2013: £110,000Average Price 2018: £134,000

North East2014 Forecast: 2.5%5 Year Growth: 16%Average Price 2013: £100,000Average Price 2018: £116,000

Yorks & Humberside2014 Forecast: 4%5 Year Growth: 20%Average Price 2013: £118,000Average Price 2018: £142,000

East Midlands2014 Forecast: 4.5%5 Year Growth: 21%Average Price 2013: £125,000Average Price 2018: £151,000

East2014 Forecast: 5.5%5 Year Growth: 25%Average Price 2013: £177,000Average Price 2018: £223,000

West Midlands2014 Forecast: 4%5 Year Growth: 21%Average Price 2013: £131,000Average Price 2018: £159,000

Wales2014 Forecast: 3.6%5 Year Growth: 18%Average Price 2013: £117,000Average Price 2018: £139,000

South West2014 Forecast: 6%5 Year Growth: 27%Average Price 2013: £179,000Average Price 2018: £228,000

South East2014 Forecast: 7.5%5 Year Growth: 30%Average Price 2013: £220,000Average Price 2018: £287,000

Prime Central London2014 Forecast: 3%5 Year Growth: 20%Average Price 2013: £1,022,000Average Price 2018: £1,231,000

Greater London2014 Forecast: 7%5 Year Growth: 28%Average Price 2013: £397,000Average Price 2018: £511,000

Central London2014 Forecast: 8%5 Year Growth: 32%Average Price 2013: £514,000Average Price 2018: £675,000

Regional House Price Forecasts 2014



Sales Market

Improved mortgage availability combined with increased confidence and high expectations of future house price growth has encouraged new – and pent up - demand to the market since the summer of 2012. In the face of a slow response of supply from both new build and existing homeowners selling their homes, the housing market has seen rapid acceleration in house price growth. Transaction levels have increased as mortgage finance has become more available, but are still only a shadow of their former selves.

We expect these features to continue to characterise the market in the short term. Activity levels will rise as demand picks up, but with supply failing to keep up this will put pressure on prices, particularly in London and the South. However, underlying economic fundamentals will act as a brake on effective demand. Household finances will remain under pressure, despite economic recovery; affordability will deteriorate as prices rise; regulatory constraints on lenders will ensure that their risk appetite is contained and the threat of intervention from the Financial Policy Committee will add to their caution. In addition, as prices begin to rise, more sellers should return to the market and more homes will be built which will help liquidity and transaction levels, and dampen the pace of price growth. Rising interest rates will mean that the pace of growth in both transactions and prices will retreat from the end of 2015/16.

As usual there will be different paths of price growth in different sectors of the market. House prices in London and the South of England will continue to outperform the average for England and Wales, while Northern parts of the country will see a more subdued revival. That reflects both economic conditions and the pattern of supply. Market dynamics which shift buyers from higher to lower priced areas will boost prices in the central London market and also the South as families migrate out of the capital. In the Prime Central London market we expect demand to soften as investors search for better yielding assets elsewhere. As the US recovers and European markets look less risky other asset classes will begin to look more attractive.

Rental Market

In the rental market, the fact that there is more mortgage finance available will mean that there will be some degree of switching from renting to ownership, reducing demand. On the other hand, accidental landlords are likely to take the opportunity to sell, reducing supply. Affordability has deteriorated in the rental market over the last few years and with more options we expect rental growth to remain subdued in the short term. But the market will still be supported by demand in areas where house prices are least affordable and where there are larger numbers of migrant workers. As the economy recovers, demand from skilled migrants and corporates will be particularly relevant in London and the South.

New Build

New supply is imperative to the future stability of the housing market. While output is picking up, it will be impossible to produce enough in the short term to keep prices from rising in the face of new demand. The need for most house building is in London and the South, but these are precisely the areas where development land is at a premium and planning permissions are more difficult to achieve. A lack of supply is likely to be a continuing feature of the market for some time.

Summary of 2014 Forecasts

Forecast 2013 2014 2015 2016 2017 2018

Transactions 000s (HMLR & ROS)

734 800 880 970 1070 1070

Annual House Prices Inflation (HMLR) %

5 6 5.5 3 4 4

House Building Starts, 000s 100 115 118 110 110 110

Annual Rental Inflation, % 2 1.7 2.8 3 4 4.5

Housing Market Forecasts Summary

“The fixation with house prices as an indicator of housing market recovery is misplaced. Transaction levels are a far superior indicator of housing market health. A liquid and active market is the key to avoiding volatility and to ensuring a stable and sustainable housing market in the UK.”



But that doesn’t mean we shouldn’t try to understand what the likely outcome would be under a set of reasonable assumptions. Our forecasts are based on an expectation that the UK economy will continue to recover, although we don’t expect it to be completely plain sailing. The UK is only just coming out of the longest and deepest recession for around a century. That means there is a lot of catching up to do and a large amount of slack which needs to be mopped up. For that reason, wage growth will probably be lacklustre for some time and unemployment is unlikely to fall

very dramatically. On top of that, inflation is likely to stay above its two per cent target for some time, which means households won’t feel able to loosen their belts quickly, especially as the cost of essentials, such as gas and electricity are rising faster than the general rate of inflation.

That’s not to say that the outlook for the economy isn’t positive – it is, but there are risks. Our central view depends on the assumption that conditions in the United States and Europe continue to

Economic Outlook

“Our forecasts are based on an expectation that the UK economy will continue to recover, although we don’t expect it to be completely plain sailing.”

Current Recovery Compared to Previous Years

Source: ONS

If trend growth continued1970s 1980s 1990s 2000s

8 9 101 2 3 4 5 6 7 18 19 2011 12 13 14 15 16 17

GDPbeforerecession

1990s 1970s & 1980s

Quarters

Time Taken to for GDP to Recover after Previous Downturns

Source: ONS

6

5

4

3

2

1

0

Year

s to

Rec

over

y

1970s 1980s 1990s 2000s

Economic Downturns

Time taken to for GDP to recover after previous downturns

Still recovering

Household Debt, £m

2,000,000

1,500,000

1,000,000

500,000

-0

1989

Q1

1990

Q1

1991

Q1

1992

Q1

1993

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1994

Q1

1995

Q1

1996

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1998

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1999

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200

0 Q

1

2001

Q1

200

2 Q

1

200

3 Q

1

200

4 Q

1

200

5 Q

1

200

6 Q

1

2007

Q1

200

8 Q

1

200

9 Q

1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

Total Household Debt Secured on Dwellings

Household debt, £m

Forecasting the outlook for the UK housing market this year is even more of a minefield than usual. Leaving aside the macroeconomic uncertainties, as the US and Europe make tentative, stumbling steps to recovery, distortions created by interventions in the UK such as Quantitative Easing, Funding for Lending and Help to Buy (H2B) add to the difficulty of the task. In addition, the uncertainty that comes with an approaching general election, especially when housing is high on the agenda for all parties, makes predicting the path of the UK housing market daunting, to say the least.

Source: Bank of England



2013 2014 2015 2016 2017 2018

GDP, YoY % 1.5 2.2 2.4 2.75 2.5 2.4

Earnings, YoY % 0.8 2.8 3.2 3.5 4.5 4.5

Unemployment Rate, % 7.7 7.4 7.0 6.8 6.0 5.5

Inflation, CPI YoY % 2.7 2.5 2.4 2.2 2.3 2.2

Bank Rate, % 0.5 0.5 0.75 1.25 2.5 3.5

Central Economic Forecast

improve and that inflation remains within bounds acceptable to the Monetary Policy Committee, meaning interest rates can remain where they are until the end of 2015. Our view on the housing market is also dependent on the expectation that the Funding for Lending Scheme (FLS) and both H2B policies remain in force for the planned period (until 2015 and 2016/17 respectively). We have assumed that a Mansion Tax policy will not come into force in this forecast period and that the Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA) will each keep beady eyes on risky lending, as instructed by the Chancellor, to prevent a housing market bubble from building up.

“Although low additions to new housing supply and overenthusiastic expectations about future house price growth have the potential to push house prices up very quickly, that can only happen if credit markets are willing.”

Source: ONS and Hamptons International

There are downside risks however. Turmoil in the United States could destabilise the world economy at a very fragile time, whilst chances of another euro debt crisis, though small, haven’t entirely disappeared. A setback in either of these economies would affect the UK and its housing market recovery. There is also the risk that increasing unrest in oil producing countries could cause a spike in oil prices and precipitate an unwanted early hike in interest rates. That could have a severe negative effect on both the UK economy and house prices via the labour market and forced sales resulting from higher unemployment and higher mortgage payments.

There is an upside too though. Global economic conditions could improve more rapidly allowing faster job creation and household balance sheet repair. A faster, yet balanced, economic recovery would consolidate a more sustainable housing market recovery, promoting transactions and a more fluid market. Although low additions to new housing supply and overenthusiastic expectations about future house price growth have the potential to push house prices up very quickly. This can only happen if credit markets are willing. The remit of the FPC and PRA to keep an eye on housing markets should prevent the market from overheating.



It is refreshing to see some improvement in housing market activity. Transactions across Great Britain stand five per cent higher than in the same period in 2012. We expect that transactions will continue to pick up but that it will take a long time before they return to levels we became used to in earlier decades. That’s partly because first-time buyers will still find it difficult to raise a deposit, especially when wage growth is low, despite the Help to Buy schemes.

But it’s not all about first-timers. About two thirds of housing market activity is driven by existing owners. The fall in house prices since 2007 means that this group has seen its equity severely eroded, with average prices now still lower than at any time between September 2006 and August 2008 (that’s five to seven years ago – a typical length of time people to stay in a home before moving on). Until households balance sheets have recovered and/or prices rises have restored their equity position, the number of sellers coming to market could be limited. This not only bears down on transaction levels but also adds fuel to house price growth by limiting the available supply.

There is another, more enduring reason why the levels of housing market transactions, and indeed house prices are unlikely to be as frothy as they were in earlier decades. That is because of the effect of lower inflation on the length of time debt burdens are carried by homeowners – explained in the pull out on the right.

The long run average number of transactions in GB per year, before the financial crisis, was about 1.2 million. Since 2008 the average has been just over half of that. It’s too simple to say that there is pent up demand equivalent to 600,000 per year (three million) that will flood into the market now, but there is a rump of activity waiting to happen. We expect the uplift to come in the next three years, while government stimuli are in place and before interest rates and affordability make things harder.

The profile of transactions will be affected by changes in behaviour around the times that government schemes come to an end and interest rates are expected to rise. The end of H2B is likely to be a relatively minor effect - the expectation of rising mortgage rates will be more relevant. This is likely to cause the bringing forward of transactions to lock in lower mortgage rates in 2015 and 2016. After that higher interest rates will begin to choke off some activity.

Transactions

2012 2013 2014 2015 2016 2017 2018

Transactions 000s (England, Wales & Scotland)

734 800 880 970 1070 1070 1100

The risks to transactions forecasts are fairly evenly balanced. On the upside there could be more activity if economic conditions allow household finances to recovery more swiftly and encourages greater numbers of existing owners to come into the market. In addition, if expectations about future house price growth increase rapidly, there will be a greater push to activity as buyers rush to beat the market.

The downside risks also spring from the state of household finances and affordability. If households are more vulnerable than we expect, deteriorating affordability could stall activity growth as prices rise, even before higher interest rates bite.

Source: Land Registry, Register of Scotland and Hamptons International

Housing Market Transactions Forecasts

GB Transactions by Quarter Compared to the Long Run Average

400

350

300

250

200

150

100

50

450

200

3 Q

2

200

3 Q

4

200

4 Q

2

200

4 Q

4

200

5 Q

2

200

5 Q

4

200

6 Q

2

200

6 Q

4

2007

Q2

2007

Q4

200

8 Q

2

200

8 Q

4

200

9 Q

2

200

9 Q

4

2010

Q2

2010

Q4

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2011

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Q2

0

Res

iden

tial

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pert

y Sa

les,

00

0s

GB Transactions by Quarter Compared to the Long Run Average

Quarterly Transactions Long Run AverageSource: HMLR and RoS

“Transactions across Great Britain stand 5% higher year to date compared to the same period in 2012.”



The government is enthusiastic that the house building market is picking up. The objective is to help the wider economy as much as to dampen the rate of house price growth. New units are not necessarily all for purchase either. The £1billion government Build to Rent Fund is expected to deliver up to 20,000 build to rent new build homes over the forecast period (included in our forecast numbers).

However, while starts are beginning to increase and existing sites in the pipeline are beginning to be completed, there is no chance that the industry will ramp up output to the levels seen in the 1970s. There are a number of reasons for this. While rising prices give builders the incentive to raise output, the rate of price growth is patchy across the UK. While we expect prices to increase across all parts of the country, the pace is quite different. The need for most house building is in London and the South, but these are precisely

the areas where development land is at a premium, and planning permissions are more difficult to achieve.

Indeed, given the timescales required to get planning approval, it is probably already too late to increase production by as much as government or builders would like in the next two to three years – especially if skilled labour constraints continue to worsen.

House Building

2012 2013 2014 2015 2016 2017 2018

Housing Starts, England 000s 79 100 115 118 110 110 110

Source: DCLG and Hamptons International

Why Lower Inflation Makes it Harder for Homebuyers

UK housing has traditionally been a good investment – but particularly so when inflation has been high. At such times property prices rise but the debt levels stay the same. But more importantly wages increase faster when inflation is high, so the debt burden also falls at a quicker rate. In high inflation times, gearing up to borrow as much as you could to buy a property meant it was tough in the first couple of years, but the pain subsided quickly. When inflation is low (and wage growth even lower) that gearing up strategy suddenly looks less attractive.

Assuming a 95 per cent H2B mortgage at a five per cent rate on the average house price of £165,000, in the first year mortgage payments would take up 21 per cent gross income. With wage growth of ten per cent - not dissimilar to wage growth in the 1980s - the burden of mortgage payments rapidly erodes. Even with five per cent wage growth the burden falls by a third in seven years, but with wage growth of two per cent the burden hangs around a lot longer. Not only does that mean that paying off a mortgage feels harder for longer, but it means that there is less money left over to save for trading up. This is one of the factors which the UK market is still adjusting to and will continue to serve as something of a brake on the pace of the house price growth that we should expect to see.

House Building Forecasts

25%

20%

15%

10%

5%

0%

Impact of wage growth on debt burden

Deb

t

Years

2% Wage Growth 5% Wage Growth 10% Wage Growth

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Impact of Wage Growth on Debt Burden

Source: Hamptons International

“The £1billion government Build to Rent Fund is expected to deliver up to 20,000 build to rent new build homes over the forecast period.”



We expect house price growth to pick up quickly in the next two years as the effect of improved economic conditions, higher expectations of future house price growth and government stimuli feed in. An amount of pent up demand has built up throughout this economic cycle which will take advantage of the availability of finance and government support to return to the market.

These expectations of price growth are important because groups of potential buyers have been waiting for the market trough to make their move. With more finance available this is now possible and so some renters will move back into ownership and contribute to demand.

But expectations can be dangerous and fuel bubbles, if they are excessive and encourage buyers to gear up their borrowing in order

to beat the market. We are confident that this will not be allowed to happen in this recovery. The extent to which prices can rise will be determined by affordability and the availability of credit. Without enough new supply the rise in prices will quickly erode affordability. With more cautious lending practices, and beady regulators’ eyes, this should prevent the overall market from overheating.

While house building is increasing – starts are up by 20 per cent compared with last year - the addition to the total stock from new build is still small and so cannot solve the underlying shortage alone. Rising prices will begin to release mortgage prisoners and should add liquidity as existing owners come to market , but we expect that a lack of supply will continue to support house price

House Prices

2012 2013 2014 2015 2016 2017 2018

England and Wales, % 0.8 5 6 5.5 3.0 4.0 4.0

Greater London, % 5.9 9.0 7.0 6.0 4.0 4.5 4.5

Prime Central London, % 13.7 10 3.0 2.5 3.5 4.5 5.5

Central London, % 8.3 11.5 8.0 7.5 4.5 4.0 4.0

South of England, % 1.7 5.0 7.0 6.0 4.5 4.5 4.5

Upside risks to house price growth come from low supply and over-enthusiastic expectations. If existing owners do not feel comfortable enough to move, or do not meet lenders criteria, tight supply will mean house prices will increase further. If this gives more fuel to expectations, prices could increase still further.

On the downside the biggest risk is from interest rates. If household finances are still too fragile to withstand a rise, this could lead to an increase in forced sales which would bear down on price growth but also affect confidence and expectations, leading to further softening.

Source: HMLR and Hamptons International

House Price Forecasts, Annual Change

“We expect house price growth to pick up in the next two years as economic recovery, greater confidence and the effect of government stimuli feed in.”

“Rising prices should encourage some more sellers into the market, adding liquidity, but a lack of supply will support house price growth, particularly in London and the South.”



Greater London

The relative buoyancy of London’s economy, coupled with overseas investment looking for a safe haven, has supported price and transactional growth in the capital for some time. Indeed, London is the only part of the UK where prices are now above their pre-recession peak. The lack of supply is also particularly pronounced in London. The gap between instructions to sell and enquiries

to buy is bigger in London than anywhere else in the UK. This suggests that London prices will continue to rise faster, at least in the short term. But looking further ahead, buyers in this part of the country are not immune from affordability issues and even though the capital’s economy is more buoyant, this is no guarantee that price growth can be sustained at such high levels.

England & Wales

East

North

London

Midlands

South East

Price recovery: 2007 market peak=100

110105100

95

9085

8075

115

Nov

- 20

07

Feb

- 20

08

May

- 20

08

Au

g - 2

00

8

Nov

- 20

08

Feb

- 20

09

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09

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g - 2

00

9

Nov

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09

Feb

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0

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10

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g - 2

010

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Feb

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1

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11

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011

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11

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2

May

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12

Au

g - 2

012

Nov

- 20

12

Feb

- 201

3

May

- 20

13

Au

g - 2

013

The Prime Central London Market1

We expect that the rate of house price growth in the Prime Central London (PCL) market will now decline. An improvement in the global economy and particularly greater confidence in Europe means that we expect fewer safe haven flows. In addition, after rapid growth of PCL values in the last few years, investors will be wary about how much more capital growth can be achieved. The performance of other investment assets is also crucial. As the recovery in US and Europe gathers pace, investors will consider other types of investment asset as their yields improve. There are already signs of some resistance on pricing in PCL markets and we expect that demand will now begin to soften. However, we still expect prices in the PCL market to rise, albeit more modestly than elsewhere in the capital, for two reasons. First the severe lack of supply and second, London’s status as a prime global city.

The Central London Market2

We expect that the Central London market will outperform other parts of the capital, particularly in the short term. That’s partly because we expect investors to continue to shift demand to areas slightly further out, yet still central, in search of better capital growth. This creates dynamics within the boroughs of the Central London market which will support the growth in prices in the overall area. As prices rise in the most expensive boroughs, buyers move to cheaper, but up and coming areas, raising prices there and increasing the average for the whole area. This trend is already responsible for double digit annual price growth in areas like Camden, Hackney and Wandsworth.

South of England

Like London, the economy in the South is more buoyant than other parts of England and supply is also limited, particularly in the areas abutting London. Both of these characteristics mean that we expect this part of the country to outperform the average for England. In addition, Hamptons International data already shows some evidence of increasing demand from Londoners wishing to relocate from the capital. As affordability conditions in the capital deteriorate, this phenomenon is will continue which suggests that the South will see similar growth to London.

Other parts of England

Outside of London and the South, house prices are expected to rise too, but at a much slower pace. This reflects the very different economic conditions across the different regions, but also the relative costs of buying and renting. In areas where house prices are lower to start with, cost of buying a home with a 95 per cent loan under the H2B scheme is less than the cost of renting. This isn’t the case in London and the Southern Regions. This should give an extra lift to the regions outside of the South, but that will be tempered by weaker economic and labour market conditions.

1/ Prime Central London is defined as the London boroughs of Kensington & Chelsea and Westminster

2/ Central London is defined as London boroughs of Camden, Hackney, Hammersmith & Fulham, Islington, Lambeth, Southwark, Tower Hamlets (Canary Wharf) and Wandsworth.

Price Recovery: 2007 Market Peak = 100

Source: HMLR



Rental growth in England and Wales has been subdued over 2013. Rents in the third quarter of 2013 were 1.6 per cent up on the previous year, compared with about four per cent a year earlier. The Northern regions; Midlands and Wales out-performed London and the South.

As the economy picks up, the most significant downside risk to rents is tenants moving out of the rental market to buy. Conventional wisdom dictates that as the sales market recovers demand will move across into sales leaving the rental market deflated. The introduction of the second stage of help to buy, with its focus on high LTV lending, would appear to hasten this trend. But high house prices means that renting is still comparatively affordable compared to the cost of servicing a high LTV mortgage in many areas. This will limit the number of tenants able to move into ownership.

The shift to ownership, aided through help to buy, will likely be less pronounced in London and the South East (at least at present lending rates) than the rest of England as it remains significantly cheaper to rent than buy, with at 95 per cent LTV. Comparing the monthly rent and mortgage repayment on an average priced two bedroom property in London (95 per cent LTV mortgage at a 5

per cent rate) shows buying costs are £240 per month more than renting. Mortgage rates would have to fall significantly to bring the monthly cost of buying at high LTVs in line with renting.

On the supply side the recovery in the sales market will also have an impact. Accidental landlords (owners renting out their properties due to being unable to sell them) will start selling their properties, as house prices pick up. It’s difficult to quantify the amount of supply that this will remove from the rental pool. However it will certainly act as a support to rental values across England and Wales, counterbalancing the loss of demand from tenants moving into home ownership.

We expect rental pricing across the UK to remain subdued as the sales market recovers and a number of renters move across into the sales market, however this will be most keenly felt in the regions where renting has become expensive compared to owning. Our forecast for rental growth in England & Wales is 1.7 per cent in 2014.

As applies for buyers, affordability is a constraint to the pace of rental growth. Over the long term, rental growth has been closely linked with earnings. But as demand for rental property has increased due to mortgage availability, problems in the owner occupied market, rents have grown more quickly, particularly in London. As the sales market recovers and more tenants are able to shift into ownership, we expect rental growth to remain subdued. As earnings growth recovers rents will likely begin start to grow in line with earnings, but the rate at which affordability deteriorates in the ownership sector will also be a factor to watch.

Rental Market

£0South West

£2,000

£4,000

£6,000

£8,000

£10,000

£12,000

£14,000

£16,000

£18,000

£20,000

An

nu

al C

osts

- 2

bed

prop

erty

South East London East EastMidlands

England Y & H North West North East

H2B2 95% LTV Mortgage Repayments Annual Rents


WestMidlands

Cost of Buying at High LTVs Versus Renting by Region


6%

5%

4%

3%

2%

1%

0%

Ren

tal I

nfl

atio

n

Wales North Midlands GreaterLondon

East of England

SouthWest

Rental Inflation YOY Q3

SouthEast

England& Wales

-1%

-2%

Source: Countrywide Lettings Index

Rental Inflation YOY Q3

Source: Countrywide Lettings Index

“The shift to ownership will likely be less pronounced in London and the South as it will remain cheaper to rent than buy with at 95 per cent LTV.”



Activity in the rental market in the South increased in 2013, with new lets up 10 per cent compared to the same period last year. It seems that many of these can be attributed to increased demand from international tenants. Between 2012 to 2013 the number of UK tenants in London and the South East was static, but the numbers of international tenants increased by 30 per cent.

The strong international demand for rental properties is primarily driven by skilled migrants and students, who are less likely to be affected by fluctuations in the sales market as domestic tenants. A similar trend has been observed among corporate tenants where demand has been steadily increasing over the year. Lets to corporate clients in 2013 are now a third (34 per cent) higher than the same period in 2012, largely driven by the Finance, Oil & Energy and the Technology sectors

As the economy improves, demand from corporates and skilled migrants is likely to continue to grow. The additional demand from these groups will supplement some of which is lost by tenants moving across into the sales market. The effects will differ across different sectors and regions though. The effect is likely to be strongest in London, but will also be evident outside of the capital. On this basis we expect the rental market price growth in the South to outperform the UK market in future years.

London and the South of England

2012 2013 2014 2015 2016 2017 2018

England and Wales, % 1.5 2 1.7 2.8 3 4 4.5

Greater London, % 2.7 3 3.5 4 4 4.5 5

Central London, % 0 0 1.5 3 3.5 4.5 5

South (SE & SW), % 0.8 0 1 3 3 4 4.5

Rental growth forecasts

The risks for rental growth are towards the upside. Falling Supply due to accidental landlords leaving the market would support prices. Strong house price growth would make affordability for buyers more difficult, thus increasing rental demand. A tightening credit conditions for new buyers would mean less tenants can move out of the rental market, propping up demand.

The downside risks for rental growth are primarily focussed on demand moving into the sales market, thus tipping the supply/demand balance in favour of tenants. Weaker economic growth, particularly if wage growth remains subdued, would also hold back rental price growth due to affordability constraints.

Change in Nationality of Hamptons International’s Tenants

Prop

orti

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f New

Ten

ants

0%

10%

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30%

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50%

60%

70%

80%

90%

100%

2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3

UK Nationals International Tenants


29 London Offices

Mayfair(Head Office)

Horsham

Tunbridge Wells

Sevenoaks

Brighton & Hove

Haywards Heath

Henley-on-Thames

Windsor

Ealing

Marlow

RickmansworthAmersham

Gerrards Cross

Maidenhead

Beaconsfield

Great Missenden

St Albans

BanburyBuckingham

Guildford

Godalming

Weybridge

Dorking& Reigate

Caterham

Sunningdale Esher

Epsom

Farnham

Alton

Chichester

Liphook

Haslemere

Fleet

Winchester

Oxford

Bath

Painswick

Cheltenham

Marlborough Newbury

Stroud

Broadway

Cirencester

Deddington

Bristol

Dulwich

Chiswick

Ealing

Clapham

Fulham

Richmond

Hampstead

St John’s Wood

Paddington

Kensington

PimlicoKnightsbridge

Chelsea

Islington

Wimbledon BalhamTeddington

Kingston upon Thames

Putney

Battersea

East Sheen

Barnes

Tower Bridge

City CanaryWharf

Sloane Square

Muswell Hill

MayfairNotting Hill

LONDON

Fionnuala EarleyResidential Research [email protected]+44 (0)207 758 8465@FE_Hamptons

Drawing on over 140 years of experience, Hamptons International is one of the premier international residential agents – with a network of more than 85 offices in the UK and key overseas markets.

We continue to expand to be one of the most valuable and innovative residential property groups in the world. Our name is synonymous with an unrivalled level of expertise and the finest properties.

Our services include:

•Sales• Lettings•Residential Development•Valuation• Land & Professional Services• Property Management•Mortgage Finance•Corporate & Relocation Services• Interior Solutions

www.hamptons.co.uk/research

©Hamptons International 2013. This report was published for the purpose of general information and Hamptons International accepts no responsibility for any loss or damage that results from the use of content contained therein, including any errors or negligence from third party information providers. It is your sole responsibility to independently check and verify the facts contained within this report. All opinions and forecasts within this report do not in any way represent investment or other advice. Reproduction of this report in whole or in part is not allowed without the prior written consent of Hamptons International.

Beyond your expectationswww.hamptons.co.uk

Johnny MorrisHead of [email protected]+44 (0)207 758 8438@Hamptons_JM

housing market forecasts - hamptons international market forecasts autumn 2013

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