Average house 'to go up by £44,000 in five years' despite Brexit fears

Updated: 

The average price of a home is still expected to be £44,000 higher in five years' time despite the uncertainty caused by Brexit, according to economic forecasters.

However, the pace of growth in property values will more than halve during 2017 as jitters over a "hard Brexit" help to dampen the market, the Centre for Economics and Business Research (Cebr) predicts.

London and the top end of the property market will be hit particularly hard by the cool-down according to the report, with house prices there expected to dip by 5.6% next year. 

Across the UK, the typical property value stands at about £210,000, with prices expected to have increased by 6.9% during 2016.

In 2017, annual price growth is set to be weaker, at 2.6% as the UK economy navigates "challenging times", the report says, although price growth is expected to pick up to 4% by 2018.

By 2021, the average property is expected to be worth £254,000 - £44,000 more than it is now.

Cebr said that before the vote to leave the EU in June, activity in the housing market had already been slowing, following a stamp duty increase for buy-to-let investors on April 1.

Its report said: "For consumers, we expect rising inflation and increasing unemployment to squeeze disposable incomes. Weaker business investment is likely to weigh additionally on economic growth. Taken together these factors will have a dampening effect on the housing market in the coming year."

The report said substantial curbs to immigration would weaken the demand for homes. While weaker demand might ease some upward pressure on house prices, the supply of new homes coming to market could also be affected - which could force prices higher.

Cebr said across the UK, about 9% of workers in the construction sector were EU nationals. In London, every third worker on construction sites comes from the EU.

Kay Daniel Neufeld, an economist at Cebr and the main author of the report, said: "If immigration is reduced drastically, pressures on house prices could ease in certain areas.

"However, as the construction sector relies on immigrant labour skills, the UK might find it difficult to build the required number of houses to address the shortage we currently see in the market."

The report said overseas property investors could be put off the housing market if they felt the UK's reputation as a "gateway to Europe" was in jeopardy.

But for foreign buyers who are feeling more optimistic about the UK's prospects outside the EU, the fall in the value of sterling could be a welcome opportunity to snap up more homes as it acts as a discount when looking at property prices in dollars or euros.

Here is Cebr's forecast for average UK property prices over the next five years:

:: 2016, £210,000

:: 2017, £215,000

:: 2018, £224,000

:: 2019, £234,000

:: 2020, £244,000

:: 2021, £254,000