2017 House Prices: updates and predictions
By Tepilo Team | 9th February 2017
Using the data from the first property price indices of the year, Tepilo analyses how house prices have fared so far in 2017.
We previously looked at what 2017 has in store for house prices. Now, with the first house price indices of this year being released by Halifax and Nationwide, it's time to see if the early signs match up to the forecasts.
Nationwide's latest House Price Index, seen as one of the most authoritative on the market, found that UK house price growth grew steadily in January 2017, up by 0.2% on a month-by-month basis. The start of 2017 also saw annual house price growth remain broadly stable at 4.3%, only slightly down on the growth rate of 4.5% in December.
Nationwide has predicted that house prices will grow by 2% this year, and their Chief Economist, Robert Gardner, maintains that the outlook for the housing market remains clouded by uncertainty, mostly surrounding the economy and Brexit.
Gardner argues that there are grounds for optimism, with the economy remaining far more resilient than expected in the aftermath of the referendum result. According to the latest data, the economy didn't slow – as many predicted – in the second half of last year, while unemployment rates remained low.
On the other hand, Gardner also believes there are reasons to be cautious; not least the slowing of earnings growth and the recent rises in inflation. Inflation is set to increase further in the coming months off the back of a weaker pound, putting greater pressure on real wages.
He still expects, like many, the economy to slow throughout 2017. However, Nationwide maintains its stance that house price rises of around 2% are more likely than a decline in the next 12 months. Very low borrowing costs and the lack of available properties on the market should both help to sustain moderate house price growth.
Meanwhile, Halifax’s latest House Price Index – the UK’s longest-running monthly house price series – has revealed that house prices in the three months to January 2017 were 2.4% higher than the three months to October 2016. What’s more, house prices in the three months to January 2017 were also up by 5.7% on the same period a year ago.
By contrast, the annual rate of growth eased from 6.5% in December to 5.7% in January, well below the March high of 10% (this, however, was heavily influenced by the late rush from investors to buy up property before the introduction of the additional stamp duty surcharge on second homes at the start of April). House prices also dropped by 0.9% between December and January, the first monthly fall since August.
According to Martin Ellis, Halifax’s housing economist, quarterly and annual rates of house price growth have stayed robust. House prices in the UK continue to be boosted by record low interest rates, low levels of housebuilding and a dearth of supply. These fundamentals are unlikely to change much during 2017, but Ellis points out that weaker economic growth (as the UK handles its exit from the EU), squeezes on spending power and restrictions on affordability could all weaken demand for housing. This, in turn, is likely to place downward pressure on annual house price growth in the year ahead.
Halifax’s House Price Index shows that the supply of homes for sale is still very low. On a national basis, new instructions to sell failed to ramp up in December, the tenth consecutive month in which there has been no visible improvement in the flow of new listings. Stock levels therefore remain close to record lows, making life very difficult for would-be buyers. This lack of supply, though, is keeping house prices – and house price growth – steady.
Halifax has previously predicted price rises of between 1% and 4% in 2017, with this broad forecast owing to the economic and political uncertainty surrounding Brexit and what withdrawal from the EU could mean for the wider economy.
We will know more once Article 50 is eventually triggered – likely to be at some point in March – but if the economy can remain as robust as it did in the aftermath of the Brexit vote and supply continues to remain low, house prices should be kept relatively buoyant. Low borrowing costs coupled with high and consistent demand for homes will also help to maintain upward pressure on house prices.
Property sellers, as a result, should feel confident about gaining plenty of interest in their homes and, given current market conditions, should also have the upper hand when it comes to price negotiations. At the moment, it’s still very much a seller’s market – so, even with ongoing uncertainty over Brexit and the economy, sellers shouldn’t be afraid to list their home.
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