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24 Jun 2021

Top UK Cities with the Highest House Price Forecast

In what has already been a turbulent year, house prices have also had their fair share of ups and downs. However, the house price forecast in the UK is looking optimistic for the remainder of 2021.

When we look at the reasons for house price turbulence, multiple factors come into play. With the extension of the stamp-duty holiday and the launch of the First Homes Scheme, the market has been flooded with potential buyers.

Some experts are concerned about what will happen to house prices once these government schemes come to an end. However, recent forecasts for 2021 are showing strong growth.

What’s the current house price forecast?

National estate agency Savills published its annual five-year housing market predictions. They have forecast an average UK house price growth of +4% in 2021, with +21.1% total growth from 2021-2025.

Following the surprisingly resilient market in 2020, 2021 is shaping up to be equally as robust. In 2020, we saw prices rise by 7.3%. It was the first time prices had risen at this rate during a recession. Despite the property market being closed for two months during lockdown, the sector began to open in May. The introduction of stamp-duty holiday ignited activity once again and led to a property boom over the summer.

Reasons for growth

One of the contributing factors for this unexpected growth is government support. The stamp-duty holiday was welcomed during the recovery, which had a pivotal effect on the property market’s recovery.

Also, with the introduction of the First Homes Scheme, many first-time buyers will find it a lot easier to climb on the property ladder. Offering discounts of up to 50% in some cases, the scheme could be a huge helping hand.

Mortgage payments

Mortgage payments fell dramatically in March 2020 as the property market closed through lockdown. However, the availability of mortgages has risen dramatically over more recent months and approvals have hit a 13-year-high. The pandemic led to a lot of national financial uncertainty. Meaning, many prospective homeowners were unable to pay their mortgage. The introduction of mortgage payment holidays was also a huge help for those struggling to make ends meet.

How has the housing market changed?

The market has seen several trends in what buyers and renters are looking for. The first, being more space. With more and more people adapting to homeworking, there has been an increased demand for extra space for home offices. Also, there has been a demand for outdoor space. Whether it’s large gardens or living closer to public parks, many are prioritising their location too.

Secondly, buyers are no longer prioritising city-centre living. With remote working becoming more accessible, the desire to live close to the office has been diminished. As a combination of these factors, commuter towns have experienced high-level growth. Residents can seek more space, for more affordable prices.

Location breakdown

Birmingham 

Over the next four years, Birmingham is expected to see a growth of 24%. One of the major factors of Birmingham’s appeal as the prime investment location is the levels of supply and demand.

There is a continued housing shortage in Birmingham. Research suggests Birmingham needs 4,000 homes built per year, over the next 10 years, to meet the demand. However, the city is averaging a mere 900 new homes built per year since 2010.

The demand for housing will likely see a positive impact on rental prices – which is great news for investors.

Manchester

Of all the UK cities, Manchester is leading the way. This year, the city has seen some of the highest house price growth. With an increase of 6.5%, this does not come as a shock.

With more people and businesses migrating to Manchester, the economy and job markets have grown. As a result, the demand for housing has increased and the city’s property markets have seen prosperous investment and growth. You can read more about Manchester’s illustrious growth in our article here.

Liverpool

Liverpool is known for being one of the more affordable UK locations to purchase a property. Therefore, the city has seen a large number of first-time buyers entering the property market this year. As a result, house prices reached new levels in 2020 making Liverpool one of the fastest-growing markets.

Liverpool is following closely behind Manchester, as it has seen a 6.3% rise. Because the average property price is so low, Liverpool boasts some of the most incredible rental yields across the country. Areas such as the Baltic Triangle (L1) and around the Royal Liverpool University Hospital (L7) are achieving high rental yields of 8.1% and 10%.

Leeds

Leeds is also seeing sustained growth, with an increase of 5.4%. It can expect to see a 21.6% increase in housing prices over the next five years. House prices are expected to rise 15.3% on average across the UK. Meaning, Leeds is expected to outperform the rest of the country.  

Sheffield

Price growth in Sheffield reached an all-time high in May 2021. Levels peaked at the highest in nearly seven years. Sheffield is seeing a massive shortage of housing stock which is fuelling demand, and prices are going up.

Sheffield is undergoing some significant changes. The latest redevelopment initiatives, such as Heart of the City II, will transform the city’s appearance. As a result, it has become a far more appealing and sustainable location to live. 

CityRise Verdict

The general consensus is that we should feel optimistic about what the housing market has to offer. The forecast has brightened since the beginning of the year. Especially given the rate the vaccine programme is being implemented and the anticipated relaxation of social distancing measures. Also, the government support for jobs and the housing market has had a positive influence.

As the housing market grows, demand continues to soar. Higher prices combined with a lack of supply presents great scope for investors, especially in the north.

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