House prices to rise 17% in five years

House prices are set to jump by nearly a fifth over the next five years, with the strongest increases taking place outside London, a report has found.

Savills predicts that property values will rise by an average of 17% by the end of 2020, with the increase ranging from a 21.6% increase in the South East of England to a 12% rise in the North East of England over the coming five years.

Based on UK house prices from Nationwide Building Society, this would mean the typical house price jumps by more than £33,000 over the coming five years, from around £195,733 now to £229,007.

%VIRTUAL-ArticleSidebar-property-guide%The South East, the South West, the East of England and the Midlands will all see house prices pushing up at a faster rate than those in London over the coming five years, according to Savills' forecasts.

Property values in Scotland will increase by 14.2% by the end of 2020, according to Savills' forecasts, which would take them to £160,339 on average.

Meanwhile, house prices in Wales are expected to jump by 14.8% over the period, taking them to around £168,588.

Lucian Cook, director of residential research at Savills, said: "Over the next five years, the economic recovery should spread geographically.

"This is likely to result in much less London-centric price growth than we have become accustomed to."

The pace of house price growth will depend on how quickly interest rates increase over the coming five years.

The slower interest rates rise, the more capacity there is for house prices to go up, as the cost of mortgage borrowing remains relatively affordable.

Mr Cook said that as "appealing as that may sound to existing home owners", there are risks that if house prices grow too strongly while interest rates stay low, home owners will face an even tighter squeeze on their finances when rates return to "normal" levels and the cost of their mortgage increases.

Despite London being expected to see slower price growth than some other regions, the average price of a property there will still be more than double the national average, according to the report.

In London, property prices are predicted to see a 15.3% uplift over the coming five years, pushing the average house price in the capital to well over half a million.

The increase would mean the price of a home in the capital shoots up by nearly £68,000, to around £511,239.

Savills said that the cheaper boroughs on the outskirts of London have more wriggle-room for prices to continue edging upwards than more expensive areas of the capital, with Walthamstow and Lewisham expected to show the strongest growth.

Meanwhile, the South and East of England should see further gains from the "ripple effect" of London house prices as buyers look for value outside the capital.

House price growth in other parts of the country will also depend on how well cities such as Manchester and Birmingham can perform economically, which will have a knock-on effect on the surrounding property markets, the report said.

Annual house sales across the country are expected to reach 1.3 million in 2020, compared with just over 1.2 million this year.

This will be well short of the "pre-crunch norm" of around 1.7 million house sales taking place a year, as house hunters struggle to come up with a large enough deposit to buy a home, the report said.

Here is what Savills' five-year housing market could mean for house prices in 2020, using Nationwide Building Society's house price index. Figures show the percentage increase forecast by Savills, the current average house price in these regions according to Nationwide's figures and the impact that the increase predicted by Savills would have on prices in 2020:

:: North East, 12.0%, £124,345, £139,266

:: Yorkshire and the Humber, 14.2%, £145,673, £166,359

:: North West, 13.7%, £145,816, £165,793

:: East Midlands, 17.0%, £160,525, £187,814

:: West Midlands, 16.5%, £167,185, £194,770

:: East of England, 21.0%, £199,334, £241,195

:: South East, 21.6%, £247,286, £300,700

:: London, 15.3%, £443,399, £511,239

:: South West, 19.9%, £219,781, £263,517

:: Wales, 14.8%, £146,854, £168,588

:: Scotland, 14.2%, £140,402, £160,339