House prices were predicted to be the first victim of a Brexit vote, but have held up remarkably well in the second half of the year.
A historically low housing supply coupled with cheap mortgages will wrestle with tax reforms and damaged consumer confidence, but overall house prices are expected to come out on top.
Experts have put house price growth anywhere between 3-6%. However, as 2016 proved, anything can happen.
“Looking forward, house price prospects will depend crucially on developments in the wider economy, around which there is a larger degree of uncertainty than usual,” said Robert Gardner, Nationwide’s Chief Economist. “Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.
“But we continue to think a small gain (around 2%) is more likely than a decline over 2017 as a whole, since low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support for house prices.
“The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years’ worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead.”
According to Frank Knight, the slowdown in prices which has been evident in central London over the past 12-months could spread to the wider region, with Greater London prices down marginally in 2017. A slowdown in the capital could result in lower house prices across the rest of the country, with price growth ending notably down on 2016 levels.
RICS said that diminishing housing stock will dominate the residential market in 2017. The legacy of building on an insufficient scale has left the average inventory on estate agents books close to a historic low.
“House prices are predicted to rise across the whole of the UK in 2017 with an average increase of 3%,” said Simon Rubinsohn, RICS Chief Economist. “East Anglia is likely to continue its trend during 2016 and alongside the North West and West Midlands is likely to record gains higher than the national average. Meanwhile, prices in Central London look set to stabilise after recent declines, with support provided by the weaker exchange rate encouraging foreign buyers.
“Although recent announcements by the government on housing are very welcome, the ongoing shortfall of stock across much of the sales and lettings markets is set to continue to underpin prices and rents. As a result, the affordability challenge will remain very much to the fore for many. Meanwhile the lack of existing inventory in the market is impacting the ability of households to move and will contribute toward transaction activity over the whole of 2017 being a little lower that in the year just ending.”