Surveyors forecast UK house prices will rise by 3% in 2017

House prices in the UK will see an average increase of 3% over the course of 2017 and sales numbers are likely to stabilise, according to surveyors.

But the shortage of supply will continue and this could be the main driver behind higher prices while rents are expected to increase by up to 3%, says the latest forecast from the Royal Institution of Chartered Surveyors (RICS).

The supply pipeline, or lack of it, is still going to dominate the residential market as the legacy of building on an insufficient scale continues with the average inventory on estate agents books close to a historic low, the report says.

Sales activity is forecast to be around 1.15 and 1.2 million in 2017, a little below the 1.25 million likely to be recorded for the whole of 2016. RICS says that the prediction for 2017 reflects the trend over recent months.

House prices are predicted to rise across the whole of the UK in 2017 with an average increase of 3%. East Anglia is likely to continue its trend during 2016 and alongside the North West and West Midlands is likely to record gains higher than the national average.

Meanwhile, RICS believes that prices in central London look set to stabilise after recent declines, with support provided by the weaker exchange rate encouraging foreign buyers.

‘Although recent announcements by the government on housing are very welcome, the ongoing shortfall of stock across much of the sales and lettings markets is set to continue to underpin prices and rents,’ said Simon Rubinsohn, RICS chief economist.

‘As a result, the affordability challenge will remain very much to the fore for many. Meanwhile the lack of existing inventory in the market is impacting the ability of households to move and will contribute toward transaction activity over the whole of 2017 being a little lower that in the year just ending,’ he added.

RICS also points out that the Housing White Paper will be a defining moment in January to see if more radical thinking in Whitehall is a reality and the proposed ban on lettings agents fees and the unintended consequences of such a ‘blunt policy’ will also be a strong feature of the year ahead.

‘Whilst the system based on large, private housing developers and homes for owner occupation has increased house building, it’s not delivering. The UK needs a co-ordinated strategy for building across tenures, using all of the delivery and technology mechanisms at our disposal,’ said Jeremy Blackburn, RICS head of UK policy.

He explained that before the European Union referendum then Prime Minister David Cameron said that if he could have found the button in No10 to increase house building he would have pushed it repeatedly.

‘In truth there are multiple buttons and following on from housing being put at the top of the list of Theresa May’s priority list in 2017, current Government need to demonstrate a plan of action,’ added Blackburn.