Residential property prices in London are set to fall next year as uncertainty about the UK’s exit from the European Union weighs heavy on the market, according to the Centre for Economics and Business Research (Cebr).
With the Prime Minister Theresa May planning to invoke Article 50 of the formal Brexit process by the end of March, the economics consultancy believes that uncertainty surrounding Brexit negotiations is likely to have an adverse impact on the market in the capital causing home prices to decline by an average of 5.6% in 2017, with the city’s prime and most expensive areas expected to be most affected.
But despite the anticipated fall in London property prices next year, Cebr expects to see house prices across the UK as a whole increase in 2017, albeit at a reduced rate of 2.6%, down from 6.9% this year.
The housing market was already facing headwinds from tax changes before June’s EU referendum, but now it would appear that the greatest concern for investors appears to be that the government could opt for a so-called hard Brexit, which could see the UK give up membership of the Europe’s single market for goods and services to regain control of immigration.
“Nervousness and uncertainty are starting to show,” said Kay Daniel Neufeld, an economist at Cebr. “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.”
Increasing inflation, falling employment levels, a weaker business investment environment, and a likely fall in demand from international purchasers due to curbs on migration, are also expected to place downward pressure on home prices, particularly in London.