Price rises in Britain’s overvalued housing market will lag inflation this year and next and in London prices are likely to fall in 2018 as Brexit keeps a lid on demand, a Reuters poll found.
The survey of 30 housing market specialists taken in the past few weeks, predicted home prices will rise on average 1.7% in the UK this year — much slower than the predicted 2.5% increase in consumer prices.
In London, where foreign investors have fuelled skyrocketing prices, they will fall a modest 1% this year. If realised, it would mark the first annual decline for nearly a decade — after the global financial crisis hit.
The average asking price for a home was £308,075 (€351,380) in Britain and more than double that in London, according to property website Rightmove Sterling is down around 10% against the dollar and is 14% lower against the euro since Britain voted nearly two years ago to leave the EU, making properties cheaper for overseas investors but generating prolonged ambiguity over the divorce talks that has made buyers wary.
Next year, house prices will rise 2% nationally and nudge up 0.5% in London. In 2020, they are forecast to increase 2% in both markets, the poll found. The range of forecasts for London prices this year was wide — from a 6% fall to a 2.5% rise.
“There is a lot of uncertainty in the market as to where we are with Brexit negotiations. That has really kept a lid on further growth. There is a wait-and-see attitude,” said Oliver Knight, associate at estate agency Knight Frank.
Housebuilder Crest Nicholson, which sells residential properties in London and elsewhere in the UK, lowered its full-year operating margin forecast in May.
With still little clarity on how post-Brexit Britain will operate, demand in the capital will decrease over the next year, 15 of 26 respondents to an extra question said. Ten said it would stay the same and one said it would increase.
The most common reason cited was Britain’s decision to leave the EU, which is due to take effect at the end of March next. Other reasons given included changes to house sale and mortgage taxes.