The Centre for Economics and Business Research says that house prices across the UK are set to increase by 5.7 per cent over 2016 as a whole - but this nonetheless indicates a Brexit-led slowdown in the second half of the year.
That is because the average price increase for the 12 months to the end of March was eight per cent - so the new figure represents a slowdown in the rate of growth.
CEBR says the main reasons behind slower growth are the uncertainty following the EU referendum and the introduction of a stamp duty surcharge on second properties. As a result the business consultancy has downgraded its short-term house price expectations to growth of just 2.2 per cent in 2017.
However, this slowdown will not last long.
“In the medium term we expect house price growth to pick up as exit negotiations progress and investors and households gain clarity on how post-Brexit UK will look. This is in line with CEBR’s view of the negotiations progressing relatively smoothly with the outcome seeing the UK maintain a close economic relationship with the rest of the continent, without necessarily agreeing to an unrestricted flow of labour or goods and services” says a statement from the consultancy.
It says that although Brexit “does have a far-reaching impact on housing” it is important to remember that the market was losing steam even before the referendum, because of the stamp duty surcharge and buy to let tax changes, as well as a fall-off in demand for prime central London homes.
“Years of under-building 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” says Nina Skero, senior economist at CEBR.
“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 - for example, finance - are concentrated in London” she warns.
“Therefore, CEBR expects London prices to grow by 6.8 per cent in 2016 but fall 5.6 per cent in 2017 before returning to growth in 2018 and beyond”.