Every year economists, think-tanks, research teams forecast growth. With the prime central London market increasingly tied to the fortunes of the global economy, forecasting how our market will perform has become increasingly difficult.
Forecasters have often based their predictions on performance over previous economic cycles but are now having to contend with global, as well as local factors, to determine the rate of house price growth. Unsurprisingly, this means that unexpected global events have an increasing impact on the fortunes of our market.
2013 was a year that exceeded expectations in a number of ways. Both the UK economy and housing market recorded growth that was much higher than expected (1.9% and 4.4% respectively) and FTSE had its best year since 2009 with growth of 14.4% against a forecast of 9%.
At the start of 2013 consensus forecasts for UK property as a whole suggested growth of 0.2% over the course of the year. However, with sentiment turning increasingly positive as the year progressed, year-end figures recorded by various indices ranged from 4.4% (Land Registry) to as high as 8.4% (Halifax).
The prime central London market was even more extreme. At the start of 2013, many forecasters were forecasting little or no growth across prime central London. However, the year ended with values 10 percentage points higher.
So what is going to happen this year? A recent report by EY Item Club suggests another housing bubble in London – however averaged out forecasts suggest growth of around 5% for prime London property. One thing is for sure, we will know this time next year!