United Kingdom house prices will fall 1 per cent next year due to post-Brexit economic fallout, according to new research from Countrywide. 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.
Advertisement
Countrywide expects London’s sky high prices to slow to 3.5% growth in 2016, but contract by 1.25% in 2017 and rise by 2% the year after.
The index showed house prices increased by £17,000 in the year to June, bringing the typical property value to £214,000.
The company, which has more than 1,500 branches, said prices would fall because of economic weakness caused by uncertainty following the referendum decision on 23 June.
Countrywide predicts that price growth will drop to 0.5% in 2016 and -0.25% in 2017 in the North East. Price growth in the North West, Yorkshire and the Humber, Wales and the Midlands is also expected to slow over 2016.
The EU referendum is being blamed for unsettling the housing market and is being eyed for its potential impact on economic fundamentals like trade and economic growth.
Britons voted to the leave the European Union on June 23, and, since then, sterling has hit 30 year lows, every sector in the United Kingdom economy is shrinking, and GDP growth has been revised down by several institutions. This in turn will lead to a weaker economy, which will affect house prices and transactions through consumer confidence, household incomes and the labor market. But a continuing lack of property for sale and very low borrowing costs should prevent a big fall in prices and house prices have a habit of doing better than expected, she said. The predicted price falls in 2017 will mean prices returning to levels similar to the first quarter of 2016.
Countrywide stressed a higher than usual risk its forecasts could change as a result of the “extraordinary nature of the challenges ahead” in negotiating the terms of Brexit.
Countrywide, which has more than 1,500 branches across the United Kingdom, said prices will start rising again at a modest rate of 2 per cent in 2018.
“An orderly exit is in the interest of the remaining European Union members and indeed global economies”.
“Our central view is that the economy will avoid a hard landing, which is good news for housing markets”.
Ms Earley added: “Not all of the corrections are due to the vote to leave the EU”.
However, the firm says house prices will rise towards the end of 2017 at a rate of 2 per cent, and that this will continue into 2018.
Advertisement
However, on the demand side, domestic buyers find support from record-low interest rates, which were recently slashed by the Bank of England to 0.25 per cent in a post-Brexit stimulus package.
