London will see the slowest growth in house prices in the U.K. in the next five years, according to new research from Savills.

Greater London will see growth of 7% between now and the end of 2022, according to the broker’s annual forecast, with prices falling 1.5% this year and 2% next year before levelling off in 2019 and growing by 5% in 2020.

The figures compare to a 14% average rise predicted for the whole of the U.K. 

Savills cites Brexit as a cooling factor, but the reason lies equally in the sheer unaffordability of housing in London.

In London, average house prices — at £479K in August, according to the Land Registry — are 13 times the average individual’s earnings. 

The market has therefore become increasingly accessible only to more affluent, dual-income households, which will restrict potential future growth in the capital and act as a drag on its commuter belt. 

The city’s mainstream market looks particularly stretched compared to other locations: first-time buyer deposits are now 3.9 times the U.K. average, at £99,753; the average stamp duty bill, at £25,703, is 3.1 times that paid across England; and the average mortgaged home mover household income is £91,329, 66% higher than across the U.K. as a whole.
 
“London’s housing market has been pushing up against the limits of mortgage regulation and affordability for some time,” Savills research analyst Lawrence Bowles said. “The Brexit vote was the tipping point that slowed price growth. Weakened sentiment combined with expected interest rate rises now point to small, short-term price falls next year.”

Prime Central London property will fare better. Value has fallen double digits since the reform of stamp duty in 2015, and Savills' prime market forecasts anticipate stronger five-year growth for this market segment —20%, assuming London retains its leading global city status.

Rental growth is forecast to exceed house price growth in London. The rental market has had to accommodate a glut of stock after investors scrambled to buy before the 3% stamp-duty surcharge on additional homes came into effect on 1 April 2016. Asking rents fell 3.2% in the year to June 2017, compared to a 1.9% rise across England and Wales.
 
Rents in the capital have now stabilised. Compound growth of 17% is projected from 2018 to 2022, in line with wage growth but ahead of inflation.