With the UK set to begin formal negotiations with the European Union about Brexit, 2017 is a year of uncertainty. What will happen to UK house prices?
“The housing market is critically dependent on how the wider economy evolves,” comments Halifax’s housing economist, Martin Ellis. “We consider it most likely that the UK economy will soften over the course of 2017. This is most likely to result from the weakening of sterling pushing up import costs and dragging on purchasing power, both for consumers and as a determinant of business investment spending. Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment. This deterioration in the labour market, together with an expected squeeze on households’ spending power – as inflation picks up and outpaces earnings growth
later in the year – is likely to curb housing demand.”
Halifax forecasts that, as a result, house prices will rise in 2017, but that the rate of growth will slow down. Across the course of the year, property values are predicted to climb between 1 per cent and 4 per cent.
This echoes the broad consensus between other UK property professionals, with the Royal Institution of Chartered Surveyors predicting that UK house prices will rise 3 per cent in 2017.
Nationwide also predicts that house price growth will slow to 2 per cent in 2017, down from the narrow range of 4 to 6 per cent recorded in 2016.
Rightmove predicts that prices will climb 2 per cent as well.
“We forecast Inner London to remain weak and prices to fall by a further 5 per cent in 2017, as its price bubble continues to deflate, whilst Outer London is predicted to record a similar increase to this year of circa 3 per cent,” says Rightmove’s Miles Shipside.
Indeed, Home.co.uk’s report also predicts that London’s prime central market slowdown, which began three years ago, will continue.
“This trend of modest price falls in the capital will continue next year as the supply of property for sale continues to rise. The number of properties on the market in Greater London rose by 19% between November 2015 and November 2016,” forecasts Home.co.uk.
Halifax confirms that the outlook is not bright for London, with the city’s relatively adverse housing affordability position suggesting that price growth will slow more sharply in the capital than elsewhere in the UK during 2017.
Nonetheless, price growth is on the cards: UK house prices should continue to be supported by an ongoing shortage of property for sale, low levels of housebuilding, and exceptionally low interest rates. That contininuing mismatch between supply and demand will underpin growth in the housing market, despite the economic conditions.
“Overall, annual house price growth nationally is most likely expected to slow to 1-4 per cent by the end of 2017,” says Halifax. “The relatively wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy next year.”Google+