UK house prices are expected to fall for the first time since 2012 as a result of uncertainty surrounding the EU referendum, according to the professional body for property valuers.
Demand from buyers has dropped at the fasted rate in eight years, according to the member survey by the Royal Institute of Chartered Surveyors.
House prices in central London have already started to fall, the study shows, as 35 per cent more property professionals reported that prices had dropped rather than risen over the past month.
While prices are continuing to climb modestly across the rest of the UK, this trend looks set to fade, with 10 per cent more respondents predicting that prices would fall rather than rise over the coming three months.
This is the first time that a fall in prices has been predicted since 2012. London and East Anglia are expected to be worst hit with 43 per cent and 33 per cent of respondents, respectively, saying that prices will fall over the next quarter.
Yet RICS warns that for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market.
Chief economist Simon Rubinsohn says: “Instead, it appears to me that what we are looking at is a short-term drop caused by the uncertainty resulting from the forthcoming EU referendum coupled by a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties.
“Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market.”
Buyer demand fell across the UK for the second consecutive month in May and at the fastest pace since 2008, with 33 per cent more property professionals saying that demand decreased last month.
The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them, with UK rents predicted to increase by 4.7 per cent year-on-year for the next five years, compared to house price increases of 4.1 per cent.
The number of agreed sales also fell for the second consecutive month with a net balance of 22 per cent of respondents reporting a fall rather than a rise in activity.