Wales tipped for one of largest UK house price rises in next five years
Property company Savills has released its forecast for the prime housing market, revealing that price growth over the next five years will be below that of the mainstream markets, given tax changes introduced in the 2024 UK autumn budget.
Lucian Cook, head of residential research, said: "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. 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."
The company predicts that over the next five years prime housing markets outside London will increase by an average of 18.2%. Looking at the regional forecast Savills estimates that growth in Wales will be 20.5%, over 2% higher than the average for outside London at 20.5% and second only to Scotland, predicted to increase by 21%.
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James Thomas, associate director of Savills in Cardiff, said: "Following the subdued market we have seen during 2024, the return to positive growth next year will be welcomed by many. The value of prime residential property in Wales has been steadily increasing, albeit not at the same pace as in other parts of the UK.
"In the five years to September, average values in Wales rose by 6.4 per cent compared to an average of 10.7 per cent across the UK overall. However, today’s forecasts indicate a step-change, with Wales, along with Scotland, expected to see the strongest gains over the next five years, peaking at 20.5 per cent growth by 2029."
In London, Savills forecast that prices in the prime central area will rise by around +10% over the next five years; the firm expects them to fall by -4.0% next year. Lucian Cook comments, "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.
"So, even though prices are already 20% below their June 2014 peak, we expect a further modest fall in prices next year, as the market finds its level in a changed fiscal and regulatory environment."
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. "Those markets are less likely to see a ripple of demand from central areas, at a time when affluent upsizers are reacting to higher school fees."
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%. Nick Maud, director of research at Savills said: "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. And while increased exposure to inheritance tax is likely to mean a bit more stock comes to the market from downsizers, this is unlikely to upset the underlying balance between supply and demand."
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