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House price growth predicted to slow to 2% next year

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
20/12/2016

Property price inflation in 2017 is almost too close to call, but one mutual has had a go

The UK’s largest building society, Nationwide, reckons UK average property prices will rise by 2% over the course of 2017.

But it admitted that any prospects for house price growth next year depend hugely on developments in the wider economy, “around which there is a larger degree of uncertainty than usual,” according to the mutual’s chief economist Robert Gardner.

He continued: “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.”

Looking back

Nationwide said that house price growth in 2016 remained in a fairly narrow range between 4-6% throughout 2016 in line with its expectations, and only slightly above the 3-4% it expects to see over the longer term.

Gardner said: “A number of policy changes made it difficult to gauge the underlying strength of housing demand for much of 2016. In particular, the imposition of additional stamp duty on second homes in April led to a record number of property transactions in March as people brought forward purchases to avoid additional tax liabilities, resulting in an inevitable fall back in activity during the summer.

“The picture was further obscured by the gyrations of some forward-looking indicators of economic activity and consumer sentiment in the wake of the Brexit vote, where a number of indicators recorded large, but short-lived, declines.

“However, what made the most difference to the market in 2016 was that the fundamentals underpinning housing demand remained solid.  Labour market conditions were robust, with strong employment growth, healthy gains in real wages (thanks in part to low inflation) and borrowing costs falling to new record lows.”


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