"Not all of the corrections are due to the vote to leave the EU. Stamp duty and weaker house price growth expectations, particularly in London’s prime markets, have a part to play."
The Countrywide data shows house price growth slowing across all regions of the UK, with a recovery in growth rates beginning in 2018.
Countrywide predicts that London will see price growth slow to 3.5% in 2016 before a fall of 1.25% in 2017 and a recovery to 2% in 2018.
Prime Central London is expected to be the hardest hit with prices forecast to fall by 6% in 2016, rising to 0% in 2017 and 4.0% in 2018.
Countrywide says that as well as Brexit, higher stamp duty will continue to take its toll on the top end markets and after several years of double-digit price growth, expectations of future capital gain have weakened in many areas leading to reduced demand.
However the continuing lack of supply of property and very low borrowing rates is expected to remain a supportive factor for house prices.
To put the price falls in 2017 into context, Countrywide says they will mean prices returning to levels similar to Q1 2016.
Fionnuala Earley, Countrywide’s Chief Economist, said: “Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks. Our central view is that the economy will avoid a hard landing, which is good news for housing markets. However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices before they return to positive growth towards the end of 2017 and into 2018.
“Not all of the corrections are due to the vote to leave the EU. Stamp duty and weaker house price growth expectations, particularly in London’s prime markets, have a part to play. There are supports to prices on the supply side from the continuing mismatch of supply. On the demand side, ultra-low interest rates and the significant discounts available to overseas buyers resulting from the fall in Sterling will help to support prices too.”
