House prices in London will continue to fall next year, before beginning to rise in 2019, according to a high-end estate agent.
Prices in the capital will fall by 0.5 per cent next year, after a one per cent fall this year, according to Knight Frank's UK Housing Market Forecast.
However, between 2018 and 2022 London will be among the worst regions for house price growth, with prices rising 13.1 per cent over the five years, compared with growth of as much as 16.4 per cent in the North West.
The report also identified the biggest risks to the UK's housing market, naming a Brexit deal regarded as unfavourable to the UK as the top risk, while another general election, faster-than-expected interest rate rises and underperforming UK growth were all seen as risky to the market.
The biggest risks to the UK's housing market
|Risk||Scenario||UK risk factor||Prime London risk factor|
|Brexit||An unfavourable deal for the UK, or prolonged uncertainty past 2019. As well as wider economic implications, the lack of a deal could impact London’s status as a global financial centre.||6/10||7/10|
|Political upheaval||The UK government undergoes a prolonged period of instability, raising the prospect of another general election. This would undermine economic and consumer confidence.||6/10||6/10|
|Interest rates||Interest rates rise more quickly than expected.||5/10||5/10|
|UK economy||UK economic growth underperforms against expectations.||5/10||5/10|
|Geo-political factors||Rising geo-political tensions cause a global economic slowdown, affecting the UK economy.||5/10||4/10|
|Property tax changes||After a series of changes to property taxes, policymakers implement more in purchase taxes. Any additional charges could curb activity||3/10||7/10|
"The momentum in house price growth is slowing in many parts of the country, and we expect price rises to remain muted overall next year amid increased economic and political uncertainty in the run-up to Brexit and amid more muted forecasts for wage growth," said Knight Frank.
"Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth reflecting this in many locations," it added.
"The variations currently observed in the prime housing markets in London and beyond are set to continue."