The latest residential market survey from the Royal Institute of Chartered Surveyors (RICS) found that house prices in central London were already falling, with 35% of property professionals reporting a drop in prices in the past month.
The survey said that while prices are continuing to climb modestly across the rest of the UK, this is unlikely to remain the case, with 10% of respondents to the study anticipating a fall, rather than a rise in prices over the next three months.
This is the first time that a fall in prices has been predicted since 2012. London is expected to be worst hit, with 43% of respondents saying that prices will fall over the next quarter, followed by East Anglia, with 33% predicting a drop there.
Simon Rubinsohn, chief economist at the RICS, said the key theme in house prices going forward was “uncertainty”.
“It’s evident both on the demand side – our new buyer enquiries series has now fallen for two months in succession – and on the supplier side, new instructions coming on to agents’ books has resumed their downward course after a little blip upwards in the early part of the year,” said Rubinsohn.
“The impact on the wider market is still relatively modest.
“If you look at national figures, agreed sales were slightly down in May but generally remaining reasonably firm.
“The central London market is now clearly the weak spot across the country with sales dipping.”
He said that RICS near-term indicators are pointing to numbers for the wider market flatlining over the summer, with London remaining a weak spot for a few months to come.
Rubinsohn said that it was unlikely that a more affordable market will emerge in the near future.
“Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that what we are looking at is a short-term drop caused by the uncertainty resulting from the forthcoming EU Referendum coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties,” he said.
The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents will outpace them, with UK rents predicted to increase by 4.7% year-on-year for the next five years, compared to house price increases of 4.1%.