Economic risks and uncertainty will see house prices falling by 1 per cent in 2017, according to analysis by Countrywide.
The property services group predicted UK house price growth would slow to 2.5 per cent in 2016 and fall into negative territory next year, before recovering to 2 per cent in 2018.
London is likely to see price growth slow to 3.5 per cent this year, before a fall of 1.25 per cent in 2017, before a similar recovery to 2 per cent the following year.
Prime central London is expected to be the hardest hit, with prices forecast to fall by 6 per cent in 2016, rising to 0 per cent in 2017 and 4 per cent in 2018.
Prices in the south east of England are expected to ease to 3.5 per cent in 2016 - compared with 9.6 per cent in 2015 - and minus 1 per cent in 2017, while weaker economic conditions are also expected to hit prices in the north, the Midlands and Wales.
The weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices before they return to positive growth towards the end of 2017. Fionnuala EarleyThe north east will see price growth fall to 0.5 per cent in 2016 and to minus 0.25 per cent in 2017, according to Countrywide.
While the vote to leave the European Union is the main driver behind the predictions, higher stamp duty has taken its toll on the top end markets and after several years of double-digit price growth, expectations of future capital gain have weakened in many areas, leading to reduced demand.
However, a pervasive lack of property supply and very low borrowing rates will remain a supportive factor for house prices, according to Countrywide.
To put the price falls expected in 2017 into context, they will mean prices returning to levels similar to the first quarter of 2016.
Fionnuala Earley, Countrywide’s chief economist, said forecasts in the current environment are trickier than ever, as Brexit has thrown up many risks.
“Our central view is that the economy will avoid a hard landing, which is good news for housing markets,” she stated.
“However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices before they return to positive growth towards the end of 2017 and into 2018.”
peter.walker@ft.com
