House prices in London are set for a rough couple of years as value growth isn’t expected in the city until 2020, according to report from PricewaterhouseCoopers released Friday.
The professional services firm predicts that values will fall by 1.7% in 2018 compared to last year, and a further 0.2% in 2019. But between 2020 and 2022, property prices in London will rise 2.6%, moving the average value of a home in the city up to £509,000 (US$673,485), the report said.
Challenges involved in saving up for homes’ high deposits, along with "increased economic uncertainty relating to Brexit acting as a drag on international investment, and reduced numbers of housing transactions due to stamp duty changes," are stretching affordability in the capital, according to Richard Snook, senior economist at PwC, in the report.
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Across the whole of the U.K., home prices are set to rise to around £285,000 (US$377,098) by 2025—increasing 2.9% this year, 2.8% in 2019 and 3.4% between 2020 and 2022, according to the report.
On a regional level, some areas will far outperform the wider U.K. market.
The East of England, for example—home to cities like Cambridge, Norwich and Colchester—is set to see prices jump 4% this year, 4.5% in 2019 and 3.4% between 2020 and 2022, putting average prices up to £340,000 (US$449,872).
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A lack of new housing supply in the U.K. has been putting upward pressure on prices since 2011, the report said.
Looking ahead, if the government can achieve its target of building 300,000 new homes a year in England by the mid-2020s—a target being questioned by builders and developers—then the backlog from past undersupply should start to be made up. But many of the homes need to be built where demand is highest, in London, the South East and the East of England, to prevent a further worsening of affordability in those regions, PwC said.