House prices could plummet by as much as 20% after a no-deal Brexit, with the biggest collapses likely to hit London and Northern Ireland, according to accountancy firm KPMG.
Though the study found that leaving the European Union without a deal was likely to see house prices fall by between 5.4% and 7.5% in 2020, the firm said that a drop of between 10% and 20% was “not out of the question.”
KPMG warned that the ensuing turbulence would make it “impossible” for the government to achieve its housing delivery targets.
“A no-deal Brexit will see households’ finances more under strain, with any rises in earnings likely to be more subdued and higher inflation depressing their purchasing power even further,” said Yael Selfin, chief economist at KPMG in the UK.
That, coupled with rising unemployment and a decline in confidence could see people holding off on making financial commitments — which would “trigger a larger correction in house prices,” Selfin said.
KPMG said house prices could fall by 7.5% in Northern Ireland and by 7% in London, primarily because they are more reliant on trade with the EU.
While average house prices in London could fall to £422,000, down from £453,000, they would still be the highest in the country, according to the study.
A no-deal Brexit would have the least impact on house prices in Wales and the East Midlands, but they could still drop by as much as 5.4% next year, KPMG warned.
The main impact would be that people wait for the turmoil in the property market to clear, said Jan Crosby, the UK head of housing at KPMG.
He noted that this would make it “impossible” for the government to meet its housing delivery targets, and reduce building across the sector.
House prices fell nationally by 0.2% in July — the second consecutive decline — according to the latest Halifax House Price Index.
In the year to June, average prices rose by 0.9% according to official figures from the Office for National Statistics, marking the weakest growth in seven years.
The average UK house price was £2,000 higher than it was in June 2018, or £230,000.