Brexit uncertainty is forecast to hurt the UK housing market in 2017, knocking several percentage points off residential price growth.
House price inflation is expected to be 3.7 per cent this year, down from 7 per cent in 2016, according to PwC’s latest UK Economic Outlook.
Even so, the average house price is projected to be £220,000 in 2017 - £8,000 higher than in 2016 - and could be set to rise to over £300,000 by 2025.
PwC said the impact of Brexit uncertainty had mainly been felt in housing transactions, which have been down year-on-year for 12 consecutive months.
London has so far experienced the biggest slowdown, with price inflation of 4 per cent in the first four months of 2017 compared with around 13 per cent for the same period last year.
PwC projects the capital’s housing market will continue to slow, with only 2.8 per cent and 3.8 per cent growth on average in 2017 and 2018 respectively.
Meanwhile, the east and southern regions of England will continue to grow above the UK average, and Northern Ireland and the North East will continue to lag behind.
While the average house price across the UK has grown by 17 per cent since mid-2007, they are still below the 2007 peak in more than a quarter of local authorities.
PwC expects a wider economic slowdown due to Brexit uncertainty, with growth in the UK’s gross domestic product declining from 1.8 per cent in 2016 to around 1.5 per cent in 2017 and 1.4 per cent in 2018.
Richard Snook, senior economist at PwC, said: “There is a huge disparity in how sub-regional housing markets have performed since the recession. The local authorities that have experienced the greatest falls in house prices since 2007 are all based in Northern Ireland, while London dominates biggest risers with all boroughs experiencing price growth of over 50 per cent.”
Georgina Partridge, head of marketing and communications at London-based Plutus Wealth Management, said Brexit was one of a number of factors that had led to a slowdown in the market.
“We have certainly seen a real slowdown in applications, people holding off and making substantially lower offers, and some gazumping going on,” she added. “We have been seeing properties downvalued once the mortgage application has gone in.
“It is a combination of factors building up over the last few years. Lenders’ criteria have changed a lot - there has been a halt to the overstretching of income post-RDR [retail distribution review] and mortgage market review. It is not a surprise from our point of view.”
simon.allin@ft.com
