U.K. home prices will fall 2 percent next year, the second straight decline, as values in every region of the country decrease for the first time since the financial crisis began in 2008, Knight Frank LLP said.
The biggest drops will be in Wales and Scotland, while London properties will depreciate the least, the property broker said in a statement today. Knight Frank forecast a 1 percent increase in 2014 residential properties prices and a 2 percent gain a year later.
“There’s been a complete reversal of the optimism that we saw in the summer,” Grainne Gilmore, head of U.K. residential research at the London-based firm, said in an interview. “There are weak economic conditions, there is nervousness among potential buyers, there’s difficulty getting mortgages for first-time buyers and people moving up the housing chain.”
Britain’s uncertain economic prospects and fragile consumer confidence have dented demand for homes and banks are reluctant to lend. A real estate market recovery is unlikely without sustained economic growth, Hometrack Ltd., a London-based property research group, said last week.
The U.K. emerged from a recession in the three months through September with the strongest growth since 2007. Even so, recent reports have shown signs of weakness. Manufacturing output gained less than economists forecast in September, adding to evidence that the economy’s rebound is faltering.
Welsh home prices will slide 3.8 percent in 2013, extending an expected drop of 3.6 percent this year, Knight Frank said. Scottish values will fall 3.2 percent next year, the broker said. In London, residential property prices will decline 0.6 percent, according to the firm.
“There’s no job creation and that is definitely weighing on the market,” Gilmore said by telephone. “We’re seeing this gentle erosion of prices.”
Loans for home purchases are likely to total 79 billion pounds ($126 billion) this year, the Council of Mortgage Lenders said in a statement today. That’s about 15 percent higher than the 68 billion pounds the London-based industry association forecast at the start of the year.
Knight Frank forecast that luxury-home prices in central London will be little changed in 2013. That would be the worst year for properties with an average value of 3.7 million pounds since 2008, when values slumped by about 17 percent.