The latest data from Knight Frank has found that while the UK economy and housing market have held up far better than expected following the Brexit vote, the outlook for both remains uncertain.
According to the report, both the London and wider UK housing markets have outperformed expectations following the EU Referendum. However, price growth in 2017 is expected to be notably slower than this year, in all regions.
Between 2017 and 2021 UK house prices are forecast to rise by 14.2% cumulatively
Both the London and wider UK housing markets outperformed expectations following the referendum. After a sharp dip in confidence just after the vote, conditions have improved into the autumn. On most measures the mainstream UK market continues to perform strongly – with annual price growth likely to end this year at 5%.
Most regional markets have seen positive growth, the exception being Wales. The ripple of price growth from London continued in 2016 and we expect the end of year position to be that the East of England and the South East will both see stronger growth than that in Greater London.
Looking into next year, Knight Frank believes that the slowdown in prices which has been evident in central London over the past 12-months will spread to the wider region, with Greater London prices down marginally in 2017. This slowdown in the capital will likely be experienced across the rest of the country with price growth down notably on 2016 levels.
The main drivers for weaker market performance relate to economic uncertainty surrounding the Brexit process, which they believe will impact negatively on consumer confidence in the run up to and just after the serving of the formal “notice to quit” the EU. In addition the impact of reforms to the taxation of landlords will reduce demand from investors which will limit upwards pressure on prices.
Looking at the prime London market, Knight Frank suggests that a 7% fall in prices across the western part of central London in 2016 means that we are close to the bottom in terms of price adjustment in this market. Although there could be some further adjustment downwards in prime outer London markets through 2017.
For rental markets – it has been a mixed year for landlords in central London, demand from tenants has been strong, but this has been offset by a strong supply of rental properties. In our view there is a risk of further rental falls next year but not on the scale of the adjustments seen this year. The wider UK rental market looks relatively positive with modest rental growth expected. Rents could rise further if landlords begin to sell properties in an effort to offset to the impact of tax rises.