Why did so many commentators and analysts get it wrong this year? Perhaps we still don’t fully understand the strength of the forces behind the price growth we’ve been witnessing, says Camilla Dell


17th December 2013


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Prophet & Loss: The difficult business of property market forecasting

Why did so many commentators and analysts get it wrong this year? Perhaps we still don’t fully understand the strength of the forces behind the price growth we’ve been witnessing, says Camilla Dell

Around this time of year, we are often asked for our forecasts for the next twelve months. Our view on forecasts is that they are interesting to discuss, but like the weather and stock market forecasts, they are often as inaccurate as they are accurate.  

One agency was honest enough to admit in its 2014 forecast document that commentators and analysts have continually under-forecasted house price growth over the past 15-20 years. This was certainly true during the boom years of the late-1990s and early-to-mid-2000s, but it has also been the case during the bounce-back following the credit crisis.

While this is not a scientific reason to believe our “positive” forecasts, it does suggest that we still do not fully understand the strength of the forces behind the price growth we have been witnessing.

If it is possible to generalise about prime central London property, we believe that the sub-£2m frenzy will continue in 2014. We expect competition for properties priced below £1m to be particularly heated. A lot of the competition is down to the changing tax environment as it has become increasingly more expensive for buyers above £2m, either paying 7% stamp duty if buying in their own name, or 15% if buying in a company name.

Many of our investment clients are choosing to stay below the £2m level as a result, but interestingly, we are also starting to see evidence from our owner-occupier client base staying below the £2m level for fear of a future mansion tax.

However, our view is that Central London is not a homogeneous market. Prices on a per square foot basis can deviate significantly from area to area, from street to street in the same area, and from house to house in the same street, depending on a whole range of factors. This is precisely why we believe it’s so important to be guided by specialist advice, because if you don’t know the market in-depth as a buyer, or are unaware of specific factors affecting particular areas and streets, then understanding what price represents good value becomes very difficult.

Set out in the table below are the forecasts of the major agencies for Central London house price growth in 2014. When we produced the same table last year, Hamptons, Savills, Knight Frank and Jones Lang LaSalle all predicted zero price growth for 2013. However, barring a sharp collapse in prices in December, the PCL market is set to deliver high single digit price growth for 2013, and at the time of writing has risen every month in the year-to-date.

2014 Forecasts for House Prices in Central London and the UK

Central London








Knight Frank



Jones Lang LaSalle






Strutt & Parker



Chesterton Humberts



Meanwhile, we predict a fairly flat year for rents in central London in 2014. Help to Buy will inevitably take some renters out of the market and with more choice for tenants than ever before; the power is clearly with potential tenants. The top end of the rental market (properties priced at £1,000 per week upwards) may see some pick-up in demand. We are already seeing an increase in demand from our own client base, in particular from French clients looking to spend more time in the UK to escape the high tax environment back in France.

Uncertainty surrounding a possible future mansion tax may also drive more owner-occupiers looking to buy homes at the £2m-plus level to rent before buying and adopt a “wait and see” approach, waiting for the outcome of the next general election in 2015.

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