Whilst house price growth has slowed down in the West Midlands in the last year, average house prices are expected to keep growing at around 5.5% for the rest of the decade, according to PwC analysis in its latest UK Economic Outlook report. From a 5.9% growth rate in 2014, PwC predicts growth of 3.7% in 2015, 4.6% in 2016 and 5.5% in 2017-2020. Average house prices in the West Midlands are expected to rise from £195k in 2014 to £261k in 2020.
In the West Midlands, as with the rest of the UK, house prices have risen much faster than earnings and social housing supply remains constrained. The number of households in the private rented sector has more than doubled since 2001, and this trend is predicted to continue with an additional 1.8 million households becoming private renters by 2025 across the UK.
This would take the total to 7.2 million households – almost one in four of the UK total in 2025. The trend is particularly strong in the 20-39 ‘Generation Rent’ age group where more than half will be renting privately by 2025, according to PwC’s analysis.
In addition, the analysis shows that economic recovery continues, with the growth rate in the West Midlands expected to be 2.5% in 2015 and 2.4% in 2016.
Mark Smith, regional chairman at PwC in the Midlands said:
“Driven by a decade of soaring house prices pre-crisis and lower loan-to-value ratios post-crisis, the deposits needed by first time buyers have risen significantly. As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20-39 age group in the West Midlands.
“There is also a rising dichotomy in the market between those (mostly older) households who own outright and those (mostly younger) households who still have a mortgage or rent to pay.
“In the long run, a large and sustained increase in affordable housing supply will be required to meet the needs of a UK population that is growing relatively rapidly by European standards.This could involve a range of measures including further planning reform, action to address skills shortages in the housebuilding sector and enhanced financial incentives to build more homes.
“But cuts to social rents announced in the Budget will tend to work against this for local authorities and housing associations, while private developers may be cautious about expanding too rapidly. So we expect housing supply shortages to persist for at least the next decade and realistically expect to see a continuing rise in ‘Generation Rent’ until at least 2025."