L ondon house prices are on course for their first annual fall since the financial crisis as Brexit bites in the capital’s property market, industry experts warned on Wednesday. A poll of 30 specialists predicted that average house prices in London will slide around 1% this year, registering a decline for the first time since 2009 and far behind a 1.7% rise nationally. The pound is down around 10% against the dollar since Britain voted to leave the European Union two years ago, making properties cheaper for overseas investors. But doubts over the outcome of protracted divorce talks have made buyers wary, alongside stamp duty rises and the removal of tax breaks for buy-to-let investors. The Reuters poll follows figures from the Office for National Statistics which show that the average value of a home in the capital fell 0.7% in the year to March at £471,944, down around £3500. That was the second consecutive month of declines and the biggest annual fall since September 2009. More than half the experts polled were braced for dwindling demand in the capital, with one respondent predicting a fall of as much as 6% for London property. “There is a lot of uncertainty in the market as to where we are with Brexit negotiations. That has really kept a lid on further growth,” said Oliver Knight, associate at estate agency Knight Frank. Commerzbank economist Peter Dixon added: “Phasing out mortgage tax relief for buy-to-let owners has hammered the market. This will let some much needed air out of the market, particularly in London and the South-East.” The Bank of England is likely to raise interest rates in August in another brake on the market, although they will remain close to record lows, making mortgages cheap. Even so, with average asking prices in the capital standing at more that than £600,000, London properties remain out of reach of most first-time buyers. Asked to rate house prices, on a scale of one to 10 between extremely cheap and extremely expensive, respondents gave a median of nine for London and seven nationally. The poll found that London prices were forecast to recover slightly, rising 0.5%, albeit still trailing a 2% advance nationally. In 2020 they are predicted to rise by 2% in both markets.<doc-sep>House prices fell in May as a faltering economy, pressure on household budgets and the prospect of interest rate rises dogged the market. Figures from Nationwide show prices declined by 0.2% month-on-month, the third fall in four months. On an annual basis, price growth slowed to 2.4% from 2.6% in April. Robert Gardner, the building society’s chief economist, said: “There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer inquiries, while the supply of properties on the market remains more of a trickle than a torrent. “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.” The average house price was £213,618 in May – when not seasonally adjusted – up from £213,000 in April. Nationwide’s figures chime with official data that points to a slowing market, driven by London. Recent figures from the Office for National Statistics shows British house prices slid in March, with the capital recording its weakest performance since 2009. The statistics body said the decline in London could be linked to changes to stamp duty, and the Brexit vote, which has deterred foreign buyers and led to a fall in net migration to the city. Guardian business email sign-up Howard Archer, the chief economic adviser at EY Item Club, said: “The housing market is clearly struggling to gain traction and we suspect that any meaningful upturn will remain elusive over the coming months. “The fundamentals for house buyers are likely to remain challenging. Consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing. “Additionally, housing market activity remains hampered by relatively fragile consumer confidence and limited willingness to engage in major transactions.”<doc-sep>Economists and property experts have painted a gloomy picture of the year ahead for house prices, after the latest Nationwide house price index showed the market missed expectations this month. UK house prices rose 2.4 per cent in May compared with the same month last year, which was a slower rate of growth than expected, according to the new data. Between April and May, prices were down 0.2 per cent, with supply remaining low and surveyors reporting subdued levels of new buyer enquiries. It follows the trend seen throughout the first quarter of 2018, during which London was the weakest performing region with prices dropping 1 per cent on the year before. In the first three months of the year, the north of England recorded stronger house price performance than the south, while Northern Ireland led UK regions for property price growth. Robert Gardner, Nationwide’s chief economist, said the fact that annual house price growth has stayed within a “fairly narrow range” of 2-3 per cent over the past year suggested there was “little change in the balance between demand and supply in the market over that period”. “There are few signs of an imminent change,” he added. “Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. “Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house-price growth this year, though borrowing costs are likely to remain low.” ✕ Theresa May announces £10 billion for Help to Buy scheme Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said it was unlikely that the near-flat trend in prices will improve imminently. “Mortgage rates, which jumped in April, will continue to rise over the coming months,” he said, noting that the Bank of England had only delayed raising interest rates, meaning a hike is still on the cards this year. “Demand likely will remain at levels consistent with merely stagnant house prices,” Mr Tombs said. Jonathan Samuels, chief executive of property lender Octane Capital, said: “Tight supply and subdued demand are the key contributors to the ongoing limbo gripping the UK property market. A lethargic economy populated by cautious and squeezed consumers has created a property market lacking both momentum and direction. “The property market is fuelled by confidence but many consumers are running on fumes. Low stock levels and continued cheap borrowing rates will prevent a material decline in prices but equally a rise greater than very low single digits is highly unlikely. “From a house price growth perspective, 2018 is looking greyer by the day.” Craig McKinlay, sales and marketing director at Kensington Mortgages, said the trend highlighted by the Nationwide data was “all too familiar”. “An insufficient supply of new housing is continuing to make prices creep up year-on-year. Whilst price rises of late have been more sustainable, the challenges of the housing market remain,” he said. “The situation can be resolved, but it will take time, and the government will need to redouble its efforts to meet the housing targets for future generations.”<doc-sep>
Price rises in Britain's overvalued housing market will lag inflation this year and next and in London prices are likely to fall in 2018 as Brexit keeps a lid on demand, a Reuters poll found. The survey of 30 housing market specialists taken in the past few weeks, predicted UK home prices will rise on average 1.7% nationally this year - much slower than the predicted 2.5% increase in consumer prices. In London, where foreign investors have fuelled skyrocketing prices, they will fall a modest 1% this year. If realised, it would mark the first annual decline for nearly a decade - after the global financial crisis hit. Sterling is down around 10% against the dollar since Britain voted nearly two years ago to leave the European Union, making properties cheaper for overseas investors but generating prolonged ambiguity over the divorce talks that has made buyers wary. Next year, UK house prices will rise 2% nationally and nudge up 0.5% in London. In 2020, they are forecast to increase 2% in both markets, the poll found. The range of forecasts for London prices this year was wide - from a 6% fall to a 2.5% rise. "There is a lot of uncertainty in the market as to where we are with Brexit negotiations. That has really kept a lid on further growth. There is a wait-and-see attitude," said Oliver Knight, associate at estate agency Knight Frank. "We will see a slightly better performance in 2019 as the pressures between supply and demand really start coming together," he added. UK housebuilder Crest Nicholson, which sells residential properties in London and elsewhere in the UK, lowered its full-year operating margin forecast in May to the bottom end of its previous range. "Now that we are one year pre-Brexit, it is entirely plausible that due to the combination of uncertainties, some buyers may think why not wait another year and see how life is going to look," its chief executive Patrick Bergin told Reuters last month. With still little clarity on how post-Brexit Britain will operate, demand in the capital will decrease over the next year, 15 of 26 respondents to an extra question said. Ten said it would stay the same and one said it would increase. The most common reason cited was Britain's decision to leave the European Union, which is due to take effect at the end of March next year. Other reasons given included changes to house sale and mortgage taxes. The average asking price for a home was £308,075 nationally in May and more than double that in London, according to property website Rightmove. This makes home ownership just a dream for first time buyers struggling to save the 10% deposit required by most mortgage lenders. When asked to rate house prices, on a scale of one to 10 where one is extremely cheap and 10 extremely expensive, respondents gave a median of nine for London and seven nationally. The Bank of England has followed an ultra-easy monetary policy road since the financial crisis and while it is expected to raise interest rates in August, they will remain at historically rock-bottom levels, making borrowing cheap.