UK property market ends 2016 on a positive note despite Brexit
Annual house price growth in the UK ended 2016 at 4.5%, the same as in 2015, but in London it was below the national average for the first time in eight years.
The latest index data from lender the Nationwide also shows that month on month prices increased by 0.8% taking the price of an average home to £205,898.
Overall the index report says that the housing market was largely stable in 2016 but there were signs that London’s significant period of outperformance may be drawing to a close. For the first year since 2008, annual house price growth in the capital was lower than the UK average, with prices increasing by 3.7% over the year, down from 12.2% in 2015.
The South of England as a whole continued to see slightly stronger price growth than the North of England, though the differential narrowed. Price growth in Wales, Scotland and Northern Ireland remained subdued, though each saw small gains overall in 2016.
According to Robert Gardner, Nationwide’s chief economist, the prospects for house prices in 2017 will depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual.
‘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,’ he said.
‘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,’ he added.
The Nationwide also released its quarterly data which shows that all regions saw house price growth in 2016, with East Anglia topping the table for the first time since 2010, with average prices up 10.1% year on year.
London saw a further moderation in the annual rate of price growth to 3.7% from 71% in the third quarter and it was the first time since 2010 that London has not ended the year as the strongest performing region, and the first year since 2008 that it has been below the UK average.
The North was the weakest performing region, with prices little changed over the year. Wales saw a slight pick-up in the rate of growth compared to the last quarter with a 2.4% annual increase.
The picture in Scotland remained relatively subdued, with prices up 2.2% over the year, although this was an improvement on 2015 when Scotland was the only region to record price falls. Northern Ireland saw a slowing in its annual rate of price growth to 0.7%, from 2.4% in the previous quarter.
Average house prices in England increased by 0.8% in the final quarter of 2016 and were up 5.1% over the year. Most southern regions of England, with the notable exception of East Anglia, saw a further slowing in annual price growth compared with the previous quarter.
Overall, prices in the South West, Outer South East, Outer Metropolitan, London and East Anglia were up 5.5% year on year, whilst in the West Midlands, East Midlands, Yorkshire and Humberside, the North West and the North, prices rose by 3.8%.
However, in cash terms, the gap in average prices between the South and the North continued to widen and now stands at over £170,000, around £11,500 higher than a year ago.
Rob Weaver, director of investments at property crowdfunding platform Property Partner, believes that it is good news that prices are still creeping up despite Brexit and the housing market has remained resilient and is stable, particularly when compared to other investments.
‘The combination of record low borrowing rates propping up demand and a severe shortage of both housing stock and available homes for sale has meant prices have continued to rise. Predictions for the year ahead are positive although we most probably won’t be seeing London house prices over the short term,’ he pointed out.
However, he believes that in London established markets such as Clapham, Balham and Wandsworth should remain solid as they are good transitional areas for people moving out of the capital for more space to Surrey and especially Guildford, a well-established wealth corridor.
‘Overall, property prices are heading upwards slowly but surely despite uncertain times politically and economically. In the long term, the UK housing market will continue to outperform most other investment classes,’ he added.