House prices will contract in London this year and next, a new forecast has suggested, before finally beginning to rise in 2020.
Prices in the capital will fall 1.5 per cent this year and two per cent in 2018, then remain flat in 2019, before rising five per cent in 2020.
In total, house prices in the capital will rise 7.1 per cent in the years to 2022, the forecast by Savills showed - a marked decline from the 70 per cent growth seen over the past decade.
Around the rest of the UK, house price growth will rise two per cent this year before slowing to one per cent next year. It will then rise to 2.5 per cent in 2019 and five per cent in 2020.
Lucian Cook, the head of residential research at Savills, said uncertainty was weighing on sentiment.
Uncertainty over what Brexit means for the UK economy and how it will impact household finances will increasingly act as a drag on house prices.
“There is capacity for growth once we have greater clarity, but this will be constrained by rate rises and the corresponding ability to get mortgage debt, particularly in London and other higher value locations," he said
And although the Bank of England is only expected to raise interest rates by 0.25 percentage points at its meeting today, Cook suggested any rate rise is expected to impact on transaction levels.
“Mortgage regulation, introduced in 2014, is likely to show its hand as interest rates rise. But by restricting the amount people can borrow, it will take the heat out of the market and so reduce risk now and in the future."
However, rents in the capital will continue to rise faster than the rest of the UK, the figures showed. Although they will fall three per cent this year, they will rise three per cent next year, outstripping the UK's 2.5 per cent rise. By 2022, they will have risen 17 per cent, compared with the UK's 15.5 per cent.