Home values in London will fall for the first time since 2009 next year on economic uncertainty resulting from the U.K.’s vote to leave the European Union, according to Countrywide Plc.
Price growth for homes in the capital will slow to 3.5 per cent this year and drop by 1.25 per cent in 2017, the country’s largest real estate broker said in a report on Monday.
Countrywide in December forecast that values would increase by 4 per cent this year and next. Prices for properties in prime central London will drop as much as 6 per cent this year and be little changed in 2017, the report showed.
“The vote to leave the European Union has unsettled the U.K. economy,” Countrywide chief economist Fionnuala Earley said by phone. Lower expectations of capital gains were already weighing on London’s housing market, she said, while the luxury-property market was being hurt by increased sales taxes and oversupply. “The Brexit scare has just accelerated all of that,” she said.
London properties are taking longer to sell this month, despite a summer price cut, as uncertainty surrounding how Britain will negotiate its exit compounds the dampening effect of the holiday season.
Homes in the U.K. capital are staying on the market for five days more than in May, the month before Britons voted to leave the EU, property website Rightmove Plc said in a report published on Aug. 15.
The lull won’t last, however. Countrywide expects Greater London home values to rise by 2 per cent in 2018 as the economy improves and there is more clarity about how the U.K. will decouple from the EU, according to Earley.
Average prices for homes across the U.K. are set to drop 1 per cent next year before returning to growth in 2018, according to the report.
Countrywide forecast that prime central home values will increase by 4 per cent in 2018. By the beginning of that year, the firm expects prices in that market to have fallen by 15 per cent since the market’s peak in 2014.
“There are still severe supply issues which, together with a period of ultra-low interest rates, will act as a support for pricing,” Earley said. “As for prime central properties, after two years of falling prices they will begin to look attractive again.”