Annual house price growth remains broadly stable at 4.3%
The annual rate of house price growth remained “broadly stable” at the start of 2017 at 4.3%. Therefore, just below the growth rate in December of 4.5%, according to the latest Nationwide house price index.
House prices increased by 0.2% over the month, after taking account of seasonal factors.
Robert Gardner, Nationwide’s Chief Economist, said: “The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly.
“On the one hand, there are grounds for optimism. The economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11-year low in the three months to November.
“However, there are tentative signs that conditions may be about to soften. Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed.
“With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect.”
Modest Growth Still Expected in 2017
Gardner believes that the UK economy is likely to be sluggish through 2017 as uncertainty surrounding evoking article 50 looms and the squeeze on household budgets intensifies, but he believes a modest growth rate in house prices of around 2% is more likely than a decline over the course of 2017.
The record low interest rates are partly responsible for much of the resilience we have seen in the housing market. This coupled with a supply and demand imbalance which is supporting the prices. Many borrowers are taking advantage of some of the cheapest rates ever. This is anticipated to continue with lenders showing signs of wanting to do business by cutting rates further.