Brexit unease will hit housing in 2017, warns estate agency Countrywide

Brexit uncertainty will deal a blow to Britain's housing market next year, with prices forecast to contract and not recover from the shock until 2018, according to a new report.

Fresh forecasts from estate agency Countrywide estimate that home price growth across the country will slow to 2.5% this year, contract by 1% in 2017, before finally recovering to 2% in 2018.

The EU referendum is being blamed for unsettling the housing market and is being eyed for its potential impact on economic fundamentals like trade and economic growth.

"Our central view is that the economy will avoid a hard landing, which is good news for housing markets.

"However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices before they return to positive growth towards the end of 2017 and into 2018," said Countrywide's chief economist Fionnuala Earley.

Stamp duty, especially in London's prime markets, will also play a role in driving down home prices, Countrywide explained.

Countrywide expects London's sky high prices to slow to 3.5% growth in 2016, but contract by 1.25% in 2017 and rise by 2% the year after.

Prime property in the capital will see price growth drop by a stunning 6% for this year, remain flat in 2017 and rise by 4% in 2018.

Government statistics have yet to reveal a drop in market value after Brexit, with the June release only accounting for the initial seven-day period following the EU referendum results.

Numbers released by the Office for National Statistics last week showed house prices increased by £17,000 in the year to June, bringing the typical property value to £214,000.

It marked an 8.7% jump from the same month last year, compared with an 8.5% rise in the year to May.

In the months ahead, Countrywide said home owners will continue to benefit from the UK's limited housing supply, which will help prop up prices, the report explained.

Foreign buyers, meanwhile, will get a leg up from favourable exchange rates due to a weak pound, but their increased interest will also provide price support.

However, on the demand side, domestic buyers find support from record-low interest rates, which were recently slashed by the Bank of England to 0.25% in a post-Brexit stimulus package.

Countrywide stressed that there was a higher than usual risk that its forecasts could change, citing the "extraordinary nature of the challenges ahead," in negotiating the terms of Brexit.

"An orderly exit is in the interest of the remaining EU members and indeed global economies. That gives some room for an upside to these forecast numbers", the report explained.