The UK’s decision to exit from the European Union and the following economic uncertainty will not stop house prices from rising, apart from a temporary dip in London, according to new projections.
Although the next couple of years will record lower house price inflation, by 2021 the average UK property will be around £40,000 more expensive, the Centre for Economics and Business Research said.
The economic think-tank forecasts house prices across the UK will rise by 5.7 per cent this year, down from 6 per cent in 2015, to hit £194,000. They will then slow in 2017, with estimated growth of 2.2 per cent to £198,000.
House prices: The average UK property will be £40,000 more expensive by 2021, the Cebr think-tank has said
But despite a moderation in house price growth over the coming years, the average price tag will still hit £234,000 in six years’ time, after an annual 3.9 per cent increase.
‘Although Brexit has certainly sent shockwaves, Cebr expects the housing market to slow down but not plummet,’ Nina Skero, Cebr senior economist and the main author of the report, said.
She adeded: ‘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.’
Only London is expected to see prices dip by 5.6 per cent next year, after rising by 6.8 per cent this year, as the capital will be most impacted by Brexit. But even there prices are set to pick up again from 2018 onward, Cebr said.
‘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,’ Ms Skero added.
However, the top end of the London housing market, which has attracted strong interest from foreign investors in recent years, has showed ‘cracks’ before the vote on June 23, according to the report.
It said that the uncertainty stemming from Brexit was not the only reason behind the overall slowdown in the housing market.
The introduction of a stamp duty surcharge on second properties last April, which has seen many buyers bringing their transactions forward in order to avoid the higher tax, has resulted in lower sales in the second half of this year.
According to recent official figures, property values across Britain leapt by 8.1 per cent in the year to May to reach £211,230. In London, prices climbed 13.6 per cent on the year to reach £472,163.
Capital housing market: Only London is expected to see prices dip by 5.6 per cent next year, the Cebr said
The Cebr report said that in the medium and long term, the housing market will heavily depend on the economic and immigration policies agreed during the UK’s exit negotiations with the EU.
‘In the medium term we expect house price growth to pick up as exit negotiations with the EU progress and investors and households gain clarity on how post-Brexit UK will look,’ it said.
That expectation is in line with Cebr’s central view of the negotiations progressing relatively smoothly, with the UK ultimately maintaining a close economic relationship with the rest of the continent, without necessarily agreeing to an unrestricted flow of labour or goods and services.
Beyond 2021, housing market developments will depend heavily on the immigration and economic policies the UK negotiates with the rest of the world, Cebr said.
| Average UK house price Year-on-year change | ||
| 2010 | £158,000 | 5.7% |
| 2011 | £156,000 | -1.4% |
| 2012 | £156,000 | 0.4% |
| 2013 | £160,000 | 2.6% |
| 2014 | £173,000 | 8.0% |
| 2015 | £183,000 | 6.0% |
| 2016 | £194,000 | 5.7% |
| 2017 | £198,000 | 2.2% |
| 2018 | £206,000 | 4.0% |
| 2019 | £215,000 | 4.6% |
| 2020 | £225,000 | 4.4% |
| 2021 | £234,000 | 3.9% |
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