House prices to fall in 2017 as Brexit uncertainty takes hold

London is likely to see price growth slow to 3.5 per cent in 2016

Zlata Rodionova
Monday 22 August 2016 08:53
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Countrywide, which has more than 1,500 branches across the UK, said prices will start rising again at a modest rate of 2 per cent in 2018
Countrywide, which has more than 1,500 branches across the UK, said prices will start rising again at a modest rate of 2 per cent in 2018

A weaker economy caused by the uncertainty following UK’s vote to leave the EU is likely to push house prices down next year, Britain’s largest estate agent has predicted.

Price growth for homes across the country is expected to slow to 2.5 per cent in 2016 and drop by 1.25 per cent in 2017, Countrywide said in a report on Monday.

The real estate agent said the Brexit vote has unsettled the UK economy due to the uncertainty surrounding the terms of Britain’s new relationship with the EU.

Countrywide, which has more than 1,500 branches across the UK, said prices will start rising again at a modest rate of 2 per cent in 2018.

London is likely to see price growth slow to 3.5 per cent in 2016 with prices in prime central areas, such as Westminster and Kensington, dropping as much as 6 per cent this year and stagnating in 2017, before rising again by 2018.

“Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks. Our central view is that the economy will avoid a hard landing,” Fionnuala Earley, Countrywide’s chief economist, said.

“However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices,” she added.

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While the vote to leave the EU may be responsible for a drop in growth, April’s stamp duty hike is believed to have had more of an impact, according to Countrywide.

Earley said stamp duty has primarily affected demand for expensive homes. This means that after several years of double-digit price growth, people no longer expect values to keep rising at the same pace, weakening demand in the process.

She added that the chronic lack of supply of homes would continue to keep prices from falling further.

Property experts have been sending mixed signals since the shock result of the EU referendum in June, with some saying it is still too early to determine whether the Brexit vote had already had an impact on the housing market.

The number of house buyers looking for a new home fell to its lowest level since November 2013, suggesting UK’s vote to leave the EU has led to a slowdown in the property market, according to the latest data from the National Association of Estate Agents (NAEA).

While Rightmove, a property listings website, said London properties were taking longer to sell, despite a summer price cut.

However Persimmon, UK’s biggest housebuilder, said potential buyers’ interest has picked up in the second half of July after a fall in the immediate aftermath of the EU referendum.

In its latest survey, the Royal Institution of Chartered Surveyors (Rics) has recorded the fastest decline in property sales for July since the financial crisis in 2008. However, over the next five year, surveyors have forecast that prices will fall 4 per cent per year in London and 3 per cent across the UK.

“The housing market is currently balancing a raft of somewhat mixed economic news alongside the latest policy measures announced by the Bank of England, which have already begun to lower cost of mortgage finance,” Simon Rubinsohn, Rics’s chief economist, said.

Earlier this month, the Bank of England cut interest rates to a new historic low of 0.25 per cent, pushing the button on another £170bn of monetary stimulus to stop the economy sliding back into recession in the wake of the UK’s Leave vote.

Unveiling its most drastic set of GDP growth forecast downgrades in its modern history, the Bank said the UK economy will virtually grind to a halt in the wake of the Brexit vote – coming perilously close to another recession.

Download a free Brexit action plan and investment ideas from Independent partner, Hargreaves Lansdown.

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