Growth of London property prices will flatline in 2017 due to Brexit, before a sales slump according to experts.
Brexit will put the brakes on four years of house price increases as Britain begins negotiations to leave the EU.
Experts at Savills expect London property prices to flatline next year following a price increase of 7% in 2016.
Lucian Cook, Savills UK Head of Residential Research, 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.”
Savills also predicts a 16% decrease in transactions in 2018, which equates to around a million.
Meanwhile, Britain's biggest estate agent, Countrywide, predicts a 1% fall of prices across the UK except Scotland. London's most expensive areas will take the biggest hit with prices dropping 6% in Westminster and Kensington this year
The housing market will be affected by decreasing consumer confidence, reduced spending power and rises in unemployment. Countrywide believe prices will increase again by the end of next in 2018 at a slightly smaller rate of 2%.
Countrywide's Chief Economist, Fionnuala Earley, said she believes these forecasts to be too optimistic than overly gloomy. However, she said a continuing lack of property and low borrowing costs should prevent a big fall in prices.
On the other hand, French bank Société Générale said in October that London prices could plunge by 30%. They continued to say that the capital's priciest boroughs seeing a fall of 50% in property prices.
“There is no precedent for the current market and the Brexit vote makes forecasting more challenging than perhaps ever before,” said Mr Cook. “The effect of Brexit is complicating a natural shift towards the later stages of the housing market cycle, when the strongest growth is seen beyond London and the South East. What is clear is that the housing market does not like political and economic uncertainty and this points to a lower growth, lower transaction market across the board.”
Savills' report forecasts that the struggling property market will put pressure on the rental market, causing rents to increase across the capital. Experts predict London rental prices to increase by 24.5% by the end of 2021, while the rest of the country will see an increase of around 19%.
Overall, property experts have been sending mixed signals about the outcome of the UK property market overall in 2017. Some agree that it's still too early to determine whether Brexit has had an impact on the property market.
Rightmove revealed that properties in London were now taking longer to sell despite a price cut in the summer. This comes as homebuyers looking for a new home fell to its lowest level since November 2013.
The Royal Institute of Chartered Surveyors (RICS) also revealed the fastest decline in July's property sales since 2008's financial crisis. RICS forecasts a yearly 4% price fall in London over the next five years. The rest of the UK will experience a 3% drop over the next five years.
Simon Rubinsohn, RICS' Chief Economist, said: “The housing market is currently balancing a raft of somewhat mixed economic news alongside the latest policy measures announced by the Bank of England, which have already begun to lower the cost of mortgage finance.”
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Last updated on Monday 21st August 2017