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UK house prices may barely rise as Brexit weighs on economy
[LONDON] UK house prices may only eke out a modest gain next year as economic growth weakens and a pickup in inflation squeezes consumers, according to Halifax.
The mortgage lender sees housing demand easing in 2017, partly as tax changes and stricter underwriting standards restrict buy-to-let investment. It also highlighted the market in London, saying adverse affordability means the capital will see a sharper slowdown than elsewhere. Elsewhere, there are "few signs" of significant stresses and imbalances at present, it said.
London's underperformance has also been a theme of 2016, with Brexit and an increase in stamp duty weighing on the market. Luxury home prices in some of the most expensive districts are down more than 10 per cent this year, and land values are also dropping.
Property website operator Rightmove said this month that the bubble in prime London "continues to deflate", and it sees prices there declining 5 per cent in 2017.
Halifax said prices should find some support from the shortage of property for sale, low levels of building and low interest rates. It forecasts that values will be rising about one per cent to 4 per cent in the UK by the end of next year. The most recent official data showed an increase of about 7 per cent in October.
Halifax said its wide range for the forecast "reflects the higher than normal degree of uncertainty" for the economy. That's largely due to the lack of clarity about the UK's new relationship with the European Union before formal exit talks start.
"Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment," said Martin Ellis, housing economist at Halifax.
"This deterioration in the labour market, together with an expected squeeze on households' spending power, is likely to curb housing demand."
The Royal Institution of Chartered Surveyors also sees a slowdown in price growth in 2017, adding to the multiple reports that underscore the recent loss of momentum in Britain's housing market. It says the supply shortage means the average number of properties on realtors' books is close to a record low, supporting the outlook for values.