Property prices in the UK are expected to lag behind inflation for at least two years, with price growth in London turning negative, according to a new industry figures.

A Reuters survey of 30 housing market specialists taken last month, found property analysts pessimistic about house price growth. They predicted home prices will rise an average of 1.7 percent nationally in 2018, significantly slower than the 2.4 percent rate of inflation, with the situation worse in London where a decline of one percent is expected – the first annual decline since the global financial crisis of 2008.

The estimates varied, but on average the experts predicted that in 2019 house prices nationally would rise two percent and nudge up 0.5 percent in London, with both markets seeing a two percent rise in 2020. In real terms, these predictions would result in a declining or at best stagnant market for the next three years.

The limited impact of Brexit on housing prices so far has been a result of the decline of Sterling against the dollar since the EU referendum, which has made UK houses attractive to foreign firms looking to invest in property in the UK market. However, with the scope of the Brexit deal still unknown, buyers have become wary and many are expected to delay buying a new property until after the UK leaves the EU in 2019.

Britain’s high value and stable property has long been an attractive proposition for foreign investors, and has generated returns significantly higher than the stock market in recent years. However, the uncertainty of Brexit will cause many of those investors to re-examine their portfolio and could result in such investors looking at other options for their money.

For years, the London property market has existed in its own bubble. Regardless of the changes in property prices across the UK, London has continued to thrive along with an ever-increasing demand which have resulted in soaring prices. Now, as Brexit looms closer, it appears that the bubble may have burst.

Last month in May, Mark Carney, the governor of the Bank of England, revealed that the value of the average UK home has declined by £900 since the referendum. However, the Evening Standard reports that the decline in London has been far greater – as of March 2018, the figure stood at 0.7%, or an average of £3,500 for each household in the capital.

The Office of National Statistics put the decline down in large part to Brexit, saying the vote “may have deterred foreign buyers, not only from the EU but also further afield”. After two years of negotiations, the government has still not provided any clarity on the direction of Brexit or the nature of future relations with the EU, and so such foreign investment may not return for many years to come.

 

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