Brexit will stop UK house price growth in 2017
LONDON – Brexit will end British house prices growth in 2017 and lead to a slump in transactions, estate agents Savills said on Friday, in the latest sign Britain’s once red-hot housing market is beginning to cool.
Savills said increased uncertainty since the June 23 referendum will bring four years of nationwide house price increases to an end and see transactions fall by 16 percent to just over 1 million in 2018.
On average, prices will rise by 5 percent this year and in London by 7 percent but both will be flat next year as Britain triggers official divorce talks from the EU and uncertainty mounts, UK Head of Residential Research Lucian Cook said.
“A realisation that Brexit feeds into the wider economy, people’s prospects for earnings, people’s prospects for employment and then that beginning to filter through into the hard economic reality … is likely to make buyers more cautious,” he told Reuters.
On Wednesday, mortgage lender Nationwide said that after 15 successive monthly increases, house prices were flat in October and Britain’s second-biggest builder Persimmon (PSN.L) said it was slowing the pace of land buying due to Brexit.
Increases in stamp duty property tax on the most expensive properties have also hit demand, especially in central London, where some buyers have haggled down prices or delayed purchases.
Savills does not forecast a return to current levels of growth until at least 2022, with price rises cooling again at the start of the decade due to an expected increase in interest rates from 0.25 percent, which would push up borrowing costs.
The average London house price was 481,000 pounds in August according to Savills, nearly 200,000 pounds more than five years ago in 2011. But in five years’ time, Savills expects the average price to have increased by only 52,000 pounds.
Those campaigning for Britain to remain in the European Union had predicted that house prices would fall were Britain to leave the European Union but Cook said that affordable mortgages were continuing to support the market.
“We have this underlying low interest rate environment, so it’s not as if you get forced sales coming into the market as you don’t have repossessions because of issues around affordability,” he said. -Reuters