In the most expensive parts of the capital, the 2022 growth rate will climb as high as 7.5pc as the market bounces back from its pandemic low. This will be a temporary surge and the five-year average growth rate will be lower than the rest of the capital, at 4pc.
By the end of this year, nationwide house price growth will slow to 5pc, according to JLL’s predictions. This will be a big drop from the 11.8pc growth rate recorded by the Office for National Statistics in September.
The country’s house price growth will then drop to 4.5pc in 2022 and 2023.
The number of transactions are expected to fall by 17pc next year from 1.45 million to 1.2 million, largely because of the end of the stamp duty holiday, which artificially inflated activity in 2021. Higher house prices and rising interest rates will also make it harder for first-time buyers to afford a home.
The following year, however, there will be an additional 100,000 transactions, bringing the total to 1.3 million, as the end of the Help to Buy scheme in March 2023 triggers a final rush. Once this scheme closes, first-time buyer affordability will worsen.
In 2024, the general election will bring uncertainty to the market, causing transactions to fall by 15pc. House price growth will slow to 3pc.
The ageing population will place further constraints on supply. Today, a fifth of the population is over 65, an age group that will see the highest rate of population growth over the next 20 years. These homeowners often live in large houses with empty bedrooms as their children are grown up and point to lack of suitable downsizer properties.
Delivery of new homes will be “well below” the Government’s target of 300,000 units per year. Of the 1.5 million homes that need to be built over the next five years to meet demand, JLL expects a shortfall of a third – or 500,000 missing homes.