The Royal Institution of Chartered Surveyors (RICS) says there is unlikely to be any growth in UK house prices next year.
UK house price growth is set to grind to a halt in 2019 due to Brexit uncertainty and higher prices forcing many buyers out of the market, according to surveyors.
- UK home buyers and sellers sit tight as Brexit uncertainty pushes housing market to weakest level in six years
They predict overall sales volumes will weaken by around 5% in 2019, leaving the annual total close to the 1.15 million mark.
RICS says subdued activity will place downward pressure on prices, driven by Brexit uncertainty and affordability issues.
Affordability remains a significant concern for buyers. According to the Office for National Statistics prices are now a greater multiple of earnings than at any other point since records began. Data from Halifax also shows the average first-time buyer deposit is over £33,000, 71% higher than in 2008.
Prices in London and the South East are expected to pull back slightly in the first half of next year due to affordability challenges.
Prices are also expected to remain flat in the North East of England, East Anglia and the South West.
However, surveyors remain confident that prices will continue to rise in Northern Ireland, the North West of England, Wales and Scotland.
Brexit not the only "obstacle" hindering activity
RICS says that the Bank of England’s projection of a 30% fall in house prices in the event of a disorderly Brexit scenario was “implausible”.
It says: “Mainly, we would expect the Bank to cut interest rates and potentially restart quantitative easing in the wake of a no-deal. The analysis behind the 30% fall in house prices assumes the policy rate would be hiked to 5.5%.
“Nevertheless, a negative shock to the economy resulting from a no-deal outcome, expected by the majority of economic forecasters, would hit incomes and reduce demand for housing.”
The organisation says house prices are likely to remain stable due to the chronic under-supply of housing, with the government facing a huge task to meet its target of 300,000 homes per year target by 2022.
It points out that in the second-hand market not enough properties have been listed to replenish those sold. Meanwhile, despite new policy announcements from the government overall growth in new builds has slowed, with only 222,000 housing units added in 2017/18.
Tarrant Parsons, RICS economist, says: "Demand has tailed off over recent months, with Brexit uncertainty causing greater hesitancy as the withdrawal deadline draws closer. That said, the current political environment is far from the only obstacle hindering activity with a shortage of stock continuing to present buyers with limited choice, while stretched affordability is pricing many people out.”
"For the year ahead, this mixture of headwinds is unlikely to dissipate, meaning sales volumes may edge a little lower. On the back of this, house price growth at a UK level seems set to lose momentum further, although the lack of supply and a still solid labour market backdrop will likely prevent negative trends.
"It's not all bad news for the outlook however, as sentiment could be lifted if a deal were to be reached on the withdrawal agreement before too long. Furthermore, mortgage rates are set to remain favourable, with any changes in monetary policy expected to be minimal over the next twelve months."