Britain's house prices are going to fall by 1% in 2017 as Britain's economy will suffer due to the nation voting for a Brexit, according to Countrywide.
A 1% drop may not seem like a big deal, but considering house prices have continually increased for the past few years, a sudden switch to a negative reading is alarming. It is completely turning the house price trajectory upside down.
House prices will, overall, rise by 2% this year, thanks to the strong surge in buying at the beginning of the year. Property prices grew 6.5% in 2015 and 8.5% in 2014.
Countrywide, Britain's largest estate agents, said an impending hit to the economy will hurt house prices next year for sure, though. “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," said Fionnuala Earley, chief economist of Countryside.
"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.”
Britons voted to the leave the European Union on June 23, and, since then, sterling has hit 30 year lows, every sector in the UK economy is shrinking, and GDP growth has been revised down by several institutions.
In turn, the Bank of England has had to cut interest rates to a record low of 0.25% to keep people spending and paying off their debt. Lower interest rates means borrowing is cheaper.
What is interesting though is that Countrywide say that prices will stage a recovery in 2018 at the rate of 2%.
However, considering Britain is yet to trigger Article 50 — which gives the country two years to negotiate its exit from the EU — and we have no idea what the consequences will be for the UK, it's worth taking that longer term view with a pinch of salt for now.