The impact of the Leave vote will vary regionally, but hit the post-crunch market drivers the hardest, with London homeowners losing around £60,000 in equity compared with £10,000 in Scotland or £8,000 in the North East, according to PWC’s latest UK Economic Outlook report.
However, a two-year price dip is on the way, it said, with price growth decelerating to around 3% in 2016 and 1% in 2017. But the firm said it expects a rebound to 4% in 2018 with annual inflation hitting an average of 5 to 6% in the longer term.
Persistent housing supply shortages will continue to keep house prices buoyant for the longer term, it said.
PWC senior economist Richard Snook, said the short-term price slowdown will be driven by a shortage of foreign investment, uncertainty over the status of foreign nationals, falling consumer confidence and turbulence in the banking sector.
He said: “While these factors will weigh heavily on the market in the short term, we expect a gradual recovery from 2018 onwards as market fundamentals reassert themselves.”
Snook cautions that the disparity in generational wealth continues to widen, with generation rent, the 20 to 39-year-olds saving for an average of 19 years to buy a first home without family assistance.
Meanwhile, incomes for those who managed to buy have been largely insulated from this deterioration due to capital gains on their properties and low mortgage rates.
Snook said: “This emphasises our country’s need to both build more homes and increase the quality of rented accommodation. Many people cannot rely on help from the ‘bank of mum and dad’ to speed up the buying process.”
Meanwhile, UK economic growth had already eased from around 3% in 2014 to around 2% before the EU referendum due primarily to slower global growth. However, GDP growth is also expected to decelerate to 1.6% in 2016 and 0.6% in 2017.
Alternative projections do allow for a possible recession showing GDP growth in 2017 of anywhere between +1.5% and -1%.
“But even this latter relatively pessimistic scenario would not be a severe recession of the kind seen in the early 1980s or in 2008-9, said PWC’s chief economist John Hawksworth.
The short-term economic slowdown is expected to see falls in business investment from overseas, particularly in commercial property and expose construction companies and capital goods manufacturers.
PWC thinks consumer spending growth could hold up better but still drop to 1.3% in 2017.
The weaker pound should also boost net exports, however, which should move from being a drag on overall UK GDP growth in 2015 to a positive contributor in 2017.