House prices could drop 1% next year
House prices are predicted to drop 1% in 2017 as the economy is set to weaken, according to Countrywide.
The estate agency said that property price growth would slow across all regions of the UK over 2016 and 2017, before recovering to 2% growth in 2018.
London hit hard
Prime central London will be hit hardest by a slowdown in price growth, Countrywide said, with property values expected to drop by 6% this year, before stabilising in 2017, then rising by 4% in 2018.
Countrywide explained that the UK’s Leave vote from the European Union in June had disturbed the UK economy, as uncertainty surrounding trade deals and the UK’s future relationship with the member states prevailed.
Fionnuala Earley, Countrywide’s chief economist, said: “Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks. Our central view is that the economy will avoid a hard landing, which is good news for housing markets. 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.”
Higher Stamp Duty costs for pricier properties are also continuing to take their toll on the high-end housing market, Countrywide said. Following several years of bumper price growth in this market, expectations that future capital gains will weaken has led to lower demand for these properties, it added.
Despite this, record-low mortgage rates and limited housing supply will continue to prop up house prices. Putting the price falls in context, Countrywide said that a drop in 2017 will see prices return to similar levels in the first quarter of 2016.
The UK’s housing market will be dominated by the UK’s negotiations to leave the EU over the coming months and years, Countrywide added, meaning that an orderly exit would give some room for an upside to its forecast figures.