This is what will happen to house prices in 2017
How will the UK's favourite asset fare in 2017?
It's safe to say that the Brexit vote has not caused the immediate and catastrophic housing crash that former chancellor George Osborne was predicting before the referendum. But the outlook for property next year is not particularly rosy.
Liberum analysts are expecting house prices to fall by 2.5 per cent when the Brexit vote puts the brakes on the British economy next year, warning that banks might cut back on mortgage lending if prices fall even lower than that.
Howard Archer, chief UK economist for IHS Markit has forecast house prices to fall by two per cent in 2017.
Read more: House prices at the top end of the London market are down 5.4 per cent
He said that house prices will rise slightly in the near term, but added: "We believe the fundamentals for house buyers will progressively deteriorate during 2017, with consumers' purchasing power weakening markedly and the labour market likely softening."
Consumer confidence will also weigh on house prices as people become more wary of larger transactions, he said.
Archer said:
We expect that consumer uncertainty will mount particularly once the UK formally launches divorce proceedings from the EU by triggering Article 50 (the government is still aiming for an end-March move) and difficult negotiations increasingly come to the forefront.
Brexit, however, will not be the only threat to the property market next year. Many people in the industry (estate agents, especially) are worried that high property taxes will lead to lower transactions, particularly at the top end of the market. Savills have forecast transacion volumes to fall by 16 per cent over the next two years.
House prices in Chelsea have already fallen by 13 per cent this year, and Knight Frank have predicted that prices in prime central London will fall by six per cent by the end of December.
The Grade II listed house in Knightsbridge, boasting six floors, has had its price cut from £22m to £14.5m (Source: Rightmove)
James Evans, chief executive of estate agents Douglas & Gordon, said: "The government missed a golden opportunity to look at stamp duty land tax in the last Autumn Statement. Making it so expensive to move house for those at the top of the property chain has had the unintended consequence of stifling the entire market."
Read more: House prices are already shooting up along the Elizabeth line
Trevor Abrahmsohn, managing director of estate agent Glentree Estates, said:
It is a commonly held belief that the former Conservative regime was far too over zealous with property taxes, which are now the highest in the world, and for Hammond to lose valuable revenue when he is struggling to meet even the revised budget deficit forecast, seems like 'folly grandeur'.
Savills have predicted that the higher rate of stamp duty, combined with the uncertainty surrounding the Brexit negotiations, will mean prices on prime residential property won't rise again until 2019. Average house prices will stay flat in 2017, they said.
If Marine Le Pen wins the French presidential election, however, this could boost investment into London property.
Islay Robinson, chief executive of high-net-worth mortgage brokers Enness Private Clients, said:
Overseas, there is a number of political events which could impact the London property market. Firstly, the French election; following Brexit, France is not ruling out a shock result, with far-right leader of the National Front, Marine Le Pen, expected to have a good chance at the presidency. We have already seen large amounts of French investment in London in recent years and could see more in the event of Ms Le Pen’s – nicknamed ‘Madame Frexit’ – success.