House prices are set to plummet in the coming months as economic uncertainty over the EU referendum weighs on the market, according to surveyors.
The Royal Institute of Chartered Surveyors said London and East Anglia are expected to be worst hit.
Its Residential Market Survey for may found that UK house prices are expected to experience a short-term drop for the first time since 2012 with 10% more respondents predicting prices to fall over the coming three months.
House prices in Central London are already falling, with 35% more property professionals reporting a fall in prices over the last month.
Simon Rubinsohn, RICS chief economist, said: “Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU Referendum coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties.”
Buyer demand fell across the UK for the second consecutive month and at the fastest pace since 2008, with 33% more property professionals saying that demand decreased last month.
House prices are expected to regain pace in the longer-term. Rents look set to outpace them, and are predicted to increase by 4.7% year-on-year for the next five years, compared to house price increases of 4.1%.
Andy Sommerville, director of Search Acumen, said: “The government must be slightly startled that the possibility of a Brexit is engineering, for a very brief window, what it wanted to achieve along – greater affordability in housing. Fear, whether it’s rational or not, is driving the housing market, with prices in the capital already dipping downward, potentially due to overseas investors halting activity and regular citizens choosing to sit still until they’re on firmer ground.
“Regardless of the referendum, housing prospects remains bleak and a short term drop is unlikely to be beneficial to the average first time buyer, although some may be able to capitalise on the temporary advantage.
“The only solution to unaffordability remains those 240,000 houses that need building every year. Whether or not we leave the EU, we will still have to deliver more homes and this temporary uncertainty in the economy isn’t going to help get them build any quicker.”
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