Despite Brexit tremors, UK house prices will rise by £40,000 in the next five years, a new report has revealed.
The Centre for Economics and Business Research has forecast UK house prices will grow by 5.7% this year, down from 6.0% in 2015. Prices are expected to drop 2.2% in 2017.
While the average yearly growth rate is predicted to slow in the coming years, prices are still expected to hit £234,000 by 2021.
Cebr said that slower growth was a result of uncertainty following the UK’s vote to leave the EU and the introduction of a 3% increase in stamp duty on second homes in April.
Nina Skero, Cebr senior economist and main author of the report, said: “Although Brexit has certainly sent shockwaves, Cebr expects the housing market to slow down but not plummet.
“Years of underbuilding mean that demand would have to fall very dramatically to meet the low level of supply increases.
“Keeping in mind that construction companies are very likely to limit their output further in light of Brexit, price pressures will also come from the supply side.”
London will be hit the hardest by Brexit uncertainty. Prices in the capital are expected to grow by 6.8% in 2016 before falling by 5.6% in 2017, but the market will pick up again in 2018.
The report said that the prime end of the market was showing cracks well before the vote on 23 June, with regions that many of the capital’s buyers come from experiencing economic turmoil and not able to invest.
Skero said: “Property in London will, however, be more impacted than elsewhere in the country. The capital’s status as a safe haven is under threat, a relatively high share of its residents are non-UK nationals and the sectors facing the greatest uncertainty following Brexit e.g. finance are concentrated in London.”
Beyond 2020/21, housing market developments will depend heavily on the immigration and economic policies the UK negotiates with the EU and the rest of the world, Cebr said.
Stephen Smith, director of Legal & General housing partnerships, said: “What this report actually makes clear is that UK house prices are set to continue outstripping inflation for the foreseeable future. For the majority of hopeful first time buyers, that means that taking the first step onto the property ladder is unlikely to become easier any time soon.
“Something needs to change. If we are to prevent the alarming prospect of our children and grandchildren struggling to achieve homeownership, we need to mobilise both the public and private sectors to construct in excess of 250,000 homes a year. It is now up to the new Government and Housing Minister to fulfil the empty promises we have heard over past administrations and deliver a truly revolutionary housing policy.”
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