London house prices property
House prices will be broadly flat in 2017 across the UK, according to JLL forecasts Carl Court/Getty Images

House prices will grow by just 0.5% on average in the UK during 2017 as Brexit uncertainty dampens the market, says a forecast by JLL, a property firm. And in the following year, prices will rise by just 1% on average.

"The outlook, however, is particularly unpredictable presently," said Neil Chegwidden, residential research director at JLL. "Over the next couple of years we expect periods of volatility in terms of household and business sentiment as the Brexit roadmap unfolds but the underlying shortage in supply will provide support in value terms."

Britain voted to leave the EU in a referendum on 23 June. The formal Brexit process will take two years, but only begins when the government invokes Article 50 of the Lisbon Treaty, which it has said it will do by March 2017. It remains unclear what the post-Brexit relationship will be between the UK, EU, and single market, creating financial and economic uncertainty.

JLL predicts housing transaction levels to drop from 1.22m in 2016 to 1.08m in 2017, a decline of 11%. And in bad news for the government, which is targeting the construction of a million new homes by 2020, JLL believes the Brexit uncertainty will see new housing starts fall in England from around 140,000 in 2016 to 134,000 in 2017. In London, where the housing supply shortage is most acute, starts will fall between the same period from 18,000 to 16,000, said JLL.

"To double construction rates, government will need to look long-term," said Adam Challis, head of residential research at JLL. "Industry capacity will decline rapidly over the next decade, creating critical challenges of labour availability and skills. A focus on unrealistic targets during this parliament could derail policy from these bigger fixes."

JLL house price forecasts UK
JLL's house price forecasts for the UK JLL