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Monday, 14 October 2019
HOUSE prices could fall by as much as six per cent next year if the UK leaves the European Union without a deal on October 31.
The prediction comes from accountancy giant KPMG, which has modelled the impact of both “deal” and “no deal” scenarios.
A KPMG spokesman said: “Our first scenario assumes that Brexit is resolved smoothly, either with a deal in time for the October 31 deadline or through a very brief delay that results in the ratification of a withdrawal agreement. The key feature is that the UK does not leave the EU without a deal.
“In this scenario, the UK’s economy enjoys a small uplift, with GDP growth rising to 1.5 per cent in 2020.
“In this case, we expect there to be little change in house prices during 2019, with an average fall across the UK of just 0.1 per cent. The fall in London’s house prices will continue throughout 2019 to reach 4.7 per cent for the year as a whole.
“Looking at next year, on average we expect the pace of house price growth to accelerate to 1.3 per cent across the UK in 2020, representing a modest recovery on 2019.”
However, when it comes to a no-deal scenario, the picture according to KPMG is comparatively bleak. The spokesman said: “The initial impact of a no-deal scenario on the UK’s property market is a larger fall in 2019 of 1.1 per cent on average, followed by a more significant decline in average house prices of 6.2 per cent in 2020.
“While no regional market escapes unharmed, London and Northern Ireland fare the worst, owing to their greater exposure to EU trade, with house prices in 2020 falling by seven per cent and 7.5 per cent respectively in these regions.”
Jan Crosby, KPMG’s UK head of housing, warned of a likely fall in transaction volumes, adding: “The level of leverage in the housebuilding sector is also much lower — meaning that volume housebuilders will be under less pressure to materially reduce prices. This helped create the downward spiral of prices in the global financial crisis.”
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