United Kingdom house prices are set to increase at a marginally slower pace post-Brexit, but London prices are expected to swing sharply lower, according to the Centre for Economics and Business Research.
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The Centre for Economics and Business Research (CEBR) said house prices will rise by 5.7 per cent this year, but growth will fall to 2.2 per cent next year.
Earlier this year, annual house price growth across the United Kingdom was running as high as 8 per cent.
United Kingdom house prices are set to increase by 5.7% over 2016 as a whole – down from 6% in 2015 – however, given that the average price increased by 8% year-on-year in the first quarter, a slowdown will materialise in the second half of 2016, believes the consultancy.
Taking into account the CEBR’s projections, the average house price in Britain could increase from £194,000 in 2016 to £234,000 in 2021 – a rise of £40,000.
“Determining how much of any fall-back in activity is the result of the tax changes and how much is due to the referendum will be hard”, Gardner said.
Following stamp duty changes in April followed so quickly by the referendum it appears that it will be hard to discern the cause of any impact on the market he warned. Leading indicators are consistent with softening ahead.
“In the run-up to the vote the Royal Institute of Chartered Surveyors (Rics) reported declines in new buyer enquiries and expectations of weaker price growth amongst surveyors, though these trends pre-date the vote and are likely to have been impacted by the recent tax changes as well as the referendum”.
He also said it depends on how the labour market evolves which will determine the demand for homes in the future, and it was encouraging that unemployment was at a 10-year low in the three months to May.
A fall in consumer confidence since the referendum might be a sign of weakness to come in the housing market but prices could hold up if sellers decide to take their properties off the market, Gardner said.
Before the European Union referendum, the Royal Institute of Chartered Surveyors (RICS) reported a decline in new buyer enquiries and surveyors expected weak price growth, which also could have been affected by recent tax changes. “Moreover, housebuilders may react to the uncertainty by delaying construction, even though home building is already failing to keep up with the natural increase in the population”.
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“The outlook for the housing market remains unusually uncertain and it may take several months for the underlying trends in the market to become evident”, Nationwide economist Robert Gardner said.
