Demand from buyers has reduced at the fastest rate in eight years according to the latest report from property surveyors RICs.
Royal Institution of Chartered Surveyors (Rics) latest data shows 33% more property professionals reporting a decrease in buyer demand last month as the EU Referendum weighs on market sentiment.
The fall in buyer enquiries such as home movers and first time buyers is expected to result in lower UK property prices over the next few months.
Some 35% of Rics respondents reporting central London prices had fallen rather than risen over the past month.
A fall in house prices would be welcomed by hard pressed first time buyers making it more affordable with a smaller deposit or lower earnings required to buy.
EU Referendum hits London market
Comments from members identify several potential causes for a decrease in buyer demand and in particular the EU Referendum is most prevalent.
The other reason is the recent additional 3% layer of stamp duty tax introduced in April resulting in a surge of buy-to-let landlords to beat the deadline and a substantial fall in new purchases since.
RISc has said buyer demand across the UK has reduced for the second month running and at the fastest pace since 2008.
Lower demand could come from older remortgage buyers forced to repay their loan at a certain age and rather than downsizing, the equity release buyer can and agree a lifetime mortgage.
It is also the first time that a fall in prices has been predicted since 2012 with London and East Anglia expected to be the worst hit.
Of the RICs respondents members 43% have said that prices will fall over the next quarter in London although for first time buyers it is unlikely to result in the emergence of a more affordable market.
House prices expected to fall
House prices are continuing to increase at modest amounts with the Halifax price index showing a rise of 0.6% for the last month to a UK average price of £213,472.
According to Martin Ellis, Halifax housing economist, for the three months to May this year house prices are 1.4% higher and growth is unchanged at 9.2% over the year.
Over the coming months 10% more respondents predicted prices would fall rather than rise according to RICs.
The number of agreed sales has also reduced for the second consecutive month with 22% of respondents reporting a fall rather than a rise in activity.
With reduced supply of suitable properties for home movers, more remortgage buyers are remaining in their existing home and saving for a bigger deposit.
The RICs survey has revealed in the longer term house prices are thought likely to regain momentum with increases of 4.1% year-on-year for the next five years compared to 4.7% for UK rents.
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