LONDON — Britain’s house prices have defied forecasts of doom and gloom following the country’s vote to leave the European Union, according to new data from luxury estate agent Knight Frank.
However, the agency warns that, while the markets have held up far better than expected following the Brexit vote, the outlook for London and the rest of the UK remains “uncertain.”
According to Knight Frank’s latest UK Residential Forecast report on Wednesday, “conditions have improved into the autumn” and will remain to do so until 2021.
The company said that growth will be hit by uncertainty over the Brexit negotiations.
“Looking into next year we believe 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,” said Knight Frank in a statement sent to Business Insider.
The main drivers for weaker market performance relate to economic uncertainty surrounding the Brexit process
“The main drivers for weaker market performance relate to economic uncertainty surrounding the Brexit process, which we 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.”
Britain voted for a Brexit on June 23, but until Prime Minister Theresa May completes the two-year deal-making process to exit the EU, not much will change. Britain’s EU membership remains the same.
The reason why economists and analysts predicted a downturn in the economy and a negative impact on spending and investment is because uncertainty usually makes investors and companies pull back from spending money in order to remain prepared for any economic shocks.
However, Knight Frank pointed out that “the fundamentals of the UK housing market remain largely unchanged” and therefore in the long-term, property prices are likely to remain buoyant because there is a supply and demand imbalance. On top of that, credit is cheap at the moment. Interest rates are at a record low of 0.25% and therefore this makes debt cheaper to service.
Here is the chart that displays all the price growth forecasts for the UK as a whole and y region until 2021: