The recovery in the UK’s prime property market will lag behind the rest of the market over the next five years says Savills’ Nick Maud (pictured).

Prime Central London, though, is the only market to see falls next year, as it will be more directly affected by tax changes in the Autumn Budget

Outer prime London, says Savills, will see growth of +14.7% over the next five years due to demand from needs-based buyers and falling mortgage rates.

Prime regional growth will total +18.2% by 2029 benefitting from displaced demand and access to schooling.

Non-doms taxation and VAT on school fees are likely to offset some of the impacts of future cuts in interest rates.”

“In a normal housing market recovery, you would expect the top-end of the market to recover first, responding quickest to a change in sentiment,” says Lucian Cook, head of residential research.

“However, the additional stamp duty surcharge for second homes, changes in ‘non-doms’ taxation and VAT on school fees are likely to offset some of the impacts of future cuts in interest rates this time around.”

While Savills has forecast that prices in prime central London will rise by around +10% over the next five years, the firm expects prices to fall by -4.0% next year.

Maud, who is the firm’s director of research, says. “The markets of prime central London are most directly affected by the abolition of ‘non-doms’ status and an increased stamp duty barrier, both of which are likely to push some of the demand in these areas to the rental market”, says Cook.

Savills has forecast stronger growth in the domestic prime London markets, where there are more needs-based buyers who are set to benefit from a fall in mortgage rates. Here, +14.7% growth is expected over the same five-year period.

“While there are reasonable prospects for price growth in these markets over the medium term, we expect prices to remain flat next year for the best properties in the likes of Fulham, Chiswick, Wandsworth and Islington”, says Cook.

Brighter outlook

The outlook is somewhat brighter in the prime markets outside of London. Here, price growth of +2.0% is forecast in 2025, contributing to a five-year projected growth of +18.2%.

“Coastal second home hotspots are likely to remain fairly price sensitive next year, but elsewhere, prime regional housing markets are likely to benefit from some displaced demand as families look to strike a balance between house prices, commutability, and access to schooling.”