London house prices could sink up to seven per cent next year if no Brexit deal is reached by the 31 October deadline date, according to the latest research.
If the UK exits the European Union with a deal London house prices will fall by a smaller 4.7 per cent, continuing the trend of declining property prices in the capital.
Research by accountancy firm KPMG published this morning shows that the average property in the capital would cost £453,000 in 2020 following a smooth exit. However, after a no-deal Brexit the average London house price would drop to £422,000.
A no-deal Brexit would trigger a drop in house prices in every region of the UK, with the sharpest fall of 7.5 per cent seen in Northern Ireland.
The latest research shows that a drop of 10 to 20 per cent is “not out of the question” if markets react “stronger than anticipated”.
KPMG chief economist Yael Selfin said: “The housing market has been stuck in the slow lane since 2016 – with the changes to stamp duty and the uncertainties of Brexit putting the market on the back foot.
“As our forecasts show, a no-deal Brexit will see house prices decline significantly across the UK in 2020 by an average of 6.2 per cent, with more severe falls of around 10 to 20 per cent also possible if we look at historic precedents.”
Last month the Bank of England’s monetary policy committee (MPC) said that if the UK’s departure from the EU is smooth and some recovery in global growth is seen it could raise interest rates “at a gradual pace and to a limited extent, as it unanimously chose to hold the main interest rate at 0.75 per cent, where it has stood since August last year.
The committee said under no deal, the “interest rate decision would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand”.
In July, MPC member Gertjan Vlieghe said the bank might have to slash interest rates to nearly zero in the event of a no-deal Brexit.
By Jessica Clark
Source: City AM