The study, published by the Centre for Economics and Business (Cebr), says 2016 is turning into a year of two halves as the rush of buy-to-let investors looking to beat April’s stamp duty hike deadline that boosted prices in the first half wears off and the market cools.
The economics consultancy predicts that house prices will increase by 4.9 per cent in 2016 overall compared with 6.7 per cent last year and 10 per cent in 2014.
London prices are still expected to rise ahead of the rest of the UK. However, weaker demand from overseas buyers hit by economic turmoil – together with a raft of tax clampdowns targeting buy-to-let investors – has dampened demand at the prime end of the market.
Meanwhile high property prices has driven more households out of the capital and into surrounding regions in search of more affordable homes. As a result, the Cebr says prices in London will grow by around 5.8 per cent this year compared to 8.3 per cent in the south east.
Nina Skero, Cebr senior economist and main author of the report, said: “as demand for property cools, prices are being supported less by high demand and more by low supply.”
“The stock of properties coming onto the market stands at a record low as most homeowners still expect property prices to rise and do not want to sell before the market peaks. An ageing population also means that fewer households are incentivised to move. The pace of building is also failing to keep up with household growth, despite government efforts to boost construction.”