Following a lacklustre end of to 2017, forecasts are flat for property prices in 2018. However, the general consensus is that the slowdown will be modest as an undersupply of property will keep prices afloat.
Property sales in 2017 dropped to their lowest level in five years, according to ONS data. The number of residential properties sold dropped 9.8% to 866,684 in year ending June 2017, down from 961,048 in the previous year.
There was a 7.6% decrease in the nominal total value of residential property transactions in England and Wales to £248 billion for year ending June 2017, down from £269 billion in the previous year.
According to Nation Wide, UK annual house price growth ended 2017 at 2.6%, compared with 4.5% in 2016. “Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices,” said Robert Gardner, Nationwide’s Chief Economist. “However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed.”
Prices in the last three months of 2017 were 2.7% higher than in the same three months a year earlier, although the annual change in December was lower than in November (3.9%), according to the Halifax Price Index.
“As we’d anticipated, the housing market in 2017 followed a similar pattern to the previous year,” said Russell Galley, Managing Director, Halifax Community Bank. “House price growth slowed, whilst building activity, completed sales and mortgage approvals for house purchase all remained flat. This has been driven by a squeeze on real wage growth and continuing uncertainty over the economy.”
House price growth in the UK will likely come to a halt over the course of next year as the number of transactions reduces, according to the RICS housing forecast for 2018. However, the national prediction includes price growth in some regions offsetting declines in London and the South East.
“How the housing market performs in 2018 will be determined in large part by developments in the wider economy,” said Gardner. “Brexit developments will remain important, though these remain hard to foresee. We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.
“Nevertheless, housing market activity is expected to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the subdued pace of building activity evident in recent years and the shortage of properties on the market are likely to provide ongoing support for house prices.”