The slowdown in the London property market is expected to spread across Britain © Adam Gasson/Alamy
Growth in house prices will slow sharply across Britain this year as a weakening of the property market spreads beyond London, according to the country’s largest estate agency group.
Countrywide predicts that prices will rise just 1.5 per cent in 2017, down from 5 per cent last year.
It said growth would slow in areas such as the north of England and the Midlands as well as London and the south, which witnessed the most extreme rises in property values during the house price boom after the financial crisis.
Countrywide’s forecast points to increasing recognition among estate agents that slower price growth is taking hold.
The most recent survey by the Royal Institution of Chartered Surveyors this month found house price indicators at their weakest since 2013.
Fionnuala Earley, chief economist at Countrywide, said: “Economic conditions for households will remain challenging over the next year as inflation eats into [household] budgets and interest rates begin to rise.”
Property transactions have also been affected by a stamp duty surcharge introduced last year for purchasers of buy-to-let and second homes, who have become a key market force.
Meanwhile, high prices mean first-time buyers are taking longer to step on to the housing ladder.
Ms Earley expects the market to revive in 2018 and 2019 as the UK economy recovers.
Countrywide predicts overall house price growth of 2 per cent next year and 3 per cent in 2019.
However, the company cautioned the outcome of Brexit negotiations between the UK and the EU — as yet unknown — will prove key to the direction of the housing market and the broader economy.
“The outcome of these negotiations is the biggest risk to performance and is weighted to the downside,” said Countrywide.
The housing slowdown has been most acutely felt in London, where 6.2 per cent growth last year is expected by Countrywide to be followed by flat prices in 2017.
In the most expensive “prime central” areas, where a slump is already well under way, the company predicts a 2 per cent drop in prices this year.
In the West Midlands, where Birmingham has led strong growth over the past year, price rises are expected to slow from 5.7 per cent in 2016 to 2.5 per cent in 2017, while in the south-east — where commuters have fuelled strong demand for homes — the rate is forecast to slacken from 7.4 per cent to 1.5 per cent.
There has also been a fall in the number of homes changing hands, and Countrywide predicts sluggish transaction levels will continue.
But it also does not expect housebuilding to increase significantly, so “a lack of supply will therefore continue to support the level of price growth” after 2017, said the company.
According to separate figures from rival Savills, house prices have showed stark regional disparities since the financial crisis.
While London prices have increased close to 80 per cent since 2007, values in the north-east remain 9 per cent below those of 10 years ago.