Image: Pam Brophy Image: Pam Brophy

House prices may drop as much as 6.2% next year if the UK leaves the European Union without a deal, according to KPMG.

Because the housing market is so difficult to predict, the accountancy giant says prices could fall 10-20% in some areas.

However, if a deal is struck before the 31 October deadline, it forecasts prices to rise 1.3%.

London, it says, will see prices drop regardless of whether or not a deal can be agreed, with bigger falls in the event of no-deal.

In its report, KPMG said: "Overall, while a no-deal Brexit could dent property values in the short term, it may make less impact on one of the fundamental factors driving the market: the stock of regional housing.

"Housebuilders are expected to reduce the supply of new housing in some regions in the short term as a response to a deteriorating economic outlook.

"So, while there will be fallout from the initial economic shock following a no-deal Brexit, the market is expected to recover most ground in the long run."

Jan Crosby, UK head of housing at KPMG, added: "Transactions volumes will likely fall much more than prices - making government housing delivery targets impossible to achieve and slowing new building across the sector."