Early challenge for Johnson: “scary” transactions drop, prices set to fall

London and South East England are to see house price falls this year and only “very modest” growth in 2020 - and that’s assuming an orderly Brexit.

The forecast comes from consultancy PwC which says that while most regions of the country are likely to see house price growth of 2.5 to 4.0 per cent in 2019-2020, the big exception will be London and the South East.

PwC’s latest UK Economic Outlook report projects that economic growth has slowed since early 2018 due primarily to the dampening of business investment as a result of Brexit-related uncertainty and heightened global trade tensions.

House prices are projected to rise at an average for the UK as a whole of around 1.0 per cent this year, but could pick up again gradually from 2020 and rise broadly in line with earnings in the medium term. 

PwC stresses that these predictions apply to an orderly Brexit, not the No Deal threatened by Prime Minister-designate Boris Johnson.

The downbeat forecast comes just as the industry is reeling from what one key lender describes as HM Revenue & Customs reveal a drop off in transactions in June, varyingly described as “astonishing” and “scary” by leading players in the trade.

The volume of residential property transactions fell by no less than 9.6 per cent between May and June this year, ending 10 years of relatively stable month-to-month transactions figures from the Revenue.

Worse still, this represents a 16.4 per cent collapse in transactions compared to June 2018.

Marc von Grundherr, director of Benham and Reeves, describes the data as “scary reading on the face of it” but draws comfort from the fact that the deals recorded in June were probably those started in March, when the market may have been slower.

Tomer Aboody, director of property lender MT Finance, says the fall off compared with this time last year is “astonishing” and puts it down to affordability problems and uncertainty around Brexit.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Transactions … are a much more important test of property market strength than prices. Uncertainty is playing a big part and from confirmation of the new prime minister to hopefully conclusion of the EU negotiations by the end of October by the latest, some of that inevitable pent-up demand will be released. Signs of improving demand in particular over the last few months have been very encouraging, and we would like to see more of this.”