House prices in London could fall by up to 7% by the end of 2020 if the UK leaves the bloc without a deal on 31 October, according to research from accountancy firm KPMG.

However, if Britain can agree a deal with the European Union (EU), house prices in the capital will fall by a smaller 4.7%, continuing the trend of declining property prices in London, the figures suggested.

KPMG predicted that house prices in the capital will fall to £453,000 in 2020 in the event the UK leaves with a deal and £422,000 if it does not.

Property prices in Northern Ireland will also decrease significantly in the event of a hard Brexit, with a forecast decline of 7.5% to take 2020 prices to £123,000. If the UK can agree a deal with the EU, then house prices in the region would fall 0.6% to £135,000.

Commenting on the figures, KPMH chief economist Yael Selfin said: “The UK’s housing market has been stuck in the slow lane since 2016, with annual house price growth slowing to 0.9% in June 2019, from a rate of 8.2% three years previously according to data from the Land Registry.”

In the event of a no-deal Brexit, Selfin added: “While no regional market escapes unharmed in the event of a no-deal, London and Northern Ireland fare the worst, owing to their greater exposure to EU trade, with house prices in 2020 falling by 7% and 7.5%, respectively in these regions.

“The initial impact of a no-deal scenario on the UK’s property market is a larger fall in 2019 of 1.1% on average, followed by a more significant decline in average house prices of 6.2% in 2020, with the variation across regions reflecting the differences in exposure to a no-deal.”

In addition to a fall in house prices, KPMG UK head of housing Jan Crosby noted that transaction volumes “will likely fall much more than prices”, highlighting that it could become impossible for the government to reach its housing delivery targets and slowing new building across the sector.

“The level of leverage in the housebuilding sector is also much lower – meaning that volume housebuilders will be under less pressure to materially reduce prices. This helped create the downward spiral of prices in the global financial crisis,” Crosby stated.

The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain its base rate at 0.75%, where it has stood since August 2018, but claimed interest rates could rise “at a gradual pace to a limited extent” if the UK leaves the bloc in an orderly fashion.

On a no-deal Brexit, the committee said: “Interest rate decision would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand.”

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