House prices in Lewisham are expected to rise by 20 per cent in the next five years, according to a report by estate agent Savills.
The surge in value is double the projected rise for wealthier south London boroughs Lambeth and Wandsworth, which can expect just 10 per cent growth in the same period. Nick Gregori, a research analyst at Savills, explained that “potential buyers are now starting to look beyond the Tube map”.
“Buyers are realising that areas can be well connected with reasonable commutes even without the benefit of the Tube”, Gregori added.
Those priced-out of wealthier areas south of the river have begun to seek value further east, in areas such as Catford, rather than Clapham or Brixton, Savills informs. “Recent development in Lewisham has also boosted demand,” Gregori adds. This, in turn, should have a positive effect on prices.
An average house in Lewisham now costs just over £410,000, comfortably below the London average of nearly £500,000, according to figures published by the Land Registry in October.
As houses in Lewisham are more affordable than many other costlier London boroughs, and since the average cost of a home is well below the London average, properties in the area are seen by Savills to have a greater capacity for price growth.
The report, published last week, focuses on the concept of affordability being a key driver for growth in the coming years.
Potential buyers are currently constrained by high interest rates and high deposit costs in the mortgage market. Growth of house prices in wealthier, more central areas is therefore being “tempered by affordability and accessibility considerations for those heavily reliant on mortgage debt”, the report highlights.
In the last 12 months, average prices rose by just 0.6 per cent in the four highest valued boroughs – Kensington & Chelsea, Westminster,Camden and Hammersmith & Fulham – compared to much greater 12.6 percent for the lowest four.
Hackney is one borough that has become less accessible to first-time buyers as the average home reaches a cost of £640,000. Despite this, the area is still believed to have a high potential for growth, with prices forecasted to increase 15 per cent by 2020, similar to the London average for mainstream housing.
The average value of residential properties in Tower Hamlets currently averages £500,000 and is expected to rise by 12 per cent in the next five years. Meanwhile Croydon’s house prices could increase by 17 per cent from the present average of £346,000.
Whether or not these growth rates will be achieved is highly dependent on the future of the mortgage market.
High interest rates and high deposit costs, resulting from tighter mortgage regulations, are “controlling the risk of a price bubble” Savills explains, but these factors are also limiting the number of actual sales. The report implies that if demand continues to be restrained by the mortgage market, prices may not have as much scope to move higher and growth rates may have to be revised downwards.
Meanwhile, an increasing number of challenges for first time buyers are having a noticeable impact on the rental market.
Savills predicts that London’s mainstream rental market will rise by 22.8 per cent by 2020. This is significantly higher than the mainstream sales average, which is expected to rise by just 15.3 per cent. This is despite the fact that households in the private renting sector already pay a larger percentage of their income on rent than those living in other tenures, the report adds.
According to a recent study by the Council of Mortgage lenders, UK residents born in 1990 are 24 per cent less likely to own a home by the time they are 30, compared to those born two decades earlier.