House prices will fall in the next year by 1% as a result of the economy weakening following the vote to leave the EU, according to new research.
Countrywide predicts house price growth will slow to 2.5% for the rest of the year and then fall 1% in 2017 before recovering by 2% in 2018.
London is likely to be the worst affected, with prices forecast to fall by 6% in 2016, rising to 0% in 2017 and 4.0% in 2018.
The company expects the housing market to be hit by uncertainty surrounding the arrangements for leaving the EU and the effect this will have on trade and future economic growth.
Prices will fall as a result of declining consumer confidence, shrinking household incomes and increasing unemployment.
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.”
Countrywide said that the Brexit vote was not the only factor affecting the path of house prices, with higher stamp duty also taking a toll on the top end markets.
The report said that there were higher than usual risks due to “the extraordinary nature of the challenges ahead” and that lack of property and low interest rates would continue to support house prices.
Earley said: “Not all of the corrections are due to the vote to leave the EU. Stamp duty and weaker house price growth expectations, particularly in London’s prime markets, have a part to play.
“There are supports to prices on the supply side from the continuing mismatch of supply. On the demand side, ultra-low interest rates and the significant discounts available to overseas buyers resulting from the fall in sterling will help to support prices too.”
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