Data published by the Centre for Economics and Business Research shows the housing market is starting to slow as jitters over a 'hard Brexit' have created further uncertainty.
UK house price growth is set to accelerate from 6.0 per cent in 2015 to 6.9 per cent in 2016, prior to slowing to 2.6 per cent in 2017.
Results of the European Referendum came in on 24 June, and as it became clear that pollsters had got it wrong and the UK was leaving the EU, the pound dived to a 30-year low.
The vote decision came as a shock to the housing market, which had already been displaying signs of a slowdown after the introduction of a stamp duty surcharge in April this year.
As such, the initial impact of Brexit has led to a cooling in the London housing market, although this has not been as severe as had been expected.
According to the CEBR, activity in the market is set to slow in the last quarter of 2016, as Brexit uncertainty will act as a deterrent for potential buyers.
This is predicted to lead to slower annual price growth of 4.5 per cent in the fourth quarter.
It is expected that London, and especially the prime segment of the capital's housing market, will be most impacted by this slowdown, and this softening will lead to a fall in prices of 5.6 per cent in 2017.
The CEBR has predicted that before returning to strength in 2018, the housing market is expected to slow further during 2017.
According to CEBR, a retreat from the EU's single market could further jeopardise the UK’s reputation as a gateway to Europe.
It would also have implications on the supply side of the market putting upwards pressure on prices, with severe restrictions on immigration risking a bottleneck of labour in house building over the next few years.
Kay Daniel Neufeld, CEBR economist said: “Similar to other parts of the economy, the housing market has held up reasonably well in the first months following the EU referendum.
“Nevertheless, nervousness and uncertainty are starting to show in the market which in addition is still absorbing April’s stamp duty surcharge on second homes. Led by the southern regions and London, we expect to see house price growth across the UK slowing considerably in the fourth quarter of 2016, a trend that is set to continue in 2017.
“For foreign buyers feeling more optimistic about the UK’s prospects outside of the European Union, the drop in sterling could be a welcome opportunity as it works as an instantaneous discount when looking at property prices in dollars or euros, for example.”
ruth.gillbe@ft.com
