House prices will fall by 1% in 2017 as Brexit weighs the housing market down

House prices will fall by 1% in 2017 as the vote for Brexit pulls the market down, according to Countrywide, the UK's largest estate agent group. But they will recover to 2% growth in 2018.

Britain voted to leave the EU in a 23 June referendum, sparking political and economic uncertainty. Some economists say there is a risk of recession.

"Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks," said Fionnuala Earley, chief economist of Countrywide, which has more than 1,500 branches across 50 brands, including Bairstow Eves and Abbotts.

"Our central view is that the economy will avoid a hard landing. However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices."

As well as Brexit, a series of tax increases for property investors and buyers of expensive homes have clipped demand. An affordability problem for first-time buyers in some areas, such as London and the south-east, where house prices are highest, is also testing demand.

Countrywide said house prices should grow by 2.5% on average in 2016, down from 6.5% in 2015.

The most expensive areas of London are the hardest hit. Prime central London house prices will fall by 6% in 2016 and be flat in the following year before seeing 4% growth in 2018. In the ordinary Greater London market, prices will grow 3.5% in 2016 before falling by 1.25% in 2017 and growing again by 2% in 2018.

Responding to the worsening economic outlook after the EU referendum, the Bank of England slashed its base rate in half to 0.25%, a new all-time-low, and boosted its stimulus packages.