UK house prices are set to decline in 2015 driven by a pronounced slump in the capital, according to the Centre for Economics and Business Research.
Following the 8.8 per cent rise in average UK prices reported by the Office for National Statistics in 2014, the CEBR says prices will fall by 0.6 per cent this year.
In London, prices are set to fall by the greatest margin with the CEBR forecasting a 3.3 per cent decline from the current average of £514,000 to around £497,000 over the next 12 months.
The CEBR says it anticipates a fall in house prices as interest rate speculation, election uncertainties, greater supply and a dearth of foreign buyers have a material impact on the market.
The think-tank believes concerns over a possible mansion tax are “tarnishing” the UK’s status as a safe haven for the wealthy, while ongoing economic troubles across Europe will further limit the volume of foreign property buyers within the UK.
The report adds the recent stamp duty overhaul will likely result in a transaction boost and rising sales, but will be unlikely to offset the other factors.
CEBR economist Nina Skero says: “The new stamp duty system lowers tax payments for 98 per cent of home buyers and will give a slight boost to the market, but not enough to prevent a price drop.
“The uncertainty surrounding May’s election, proposed changes to property taxation, and reduced foreign demand are already bringing down house prices. Subdued price rises or modest declines also reflect a correction in the housing market after a period of very strong price growth.”