Latest forecast suggests annual property price growth to fall across Britain
Annual residential property price growth in Britain is expected to fall to 1.5% in 2017, down considerably from the 5% recorded in 2016.
The latest analysis report from Countrywide also suggests that the first half of 2018 is likely to be difficult for the housing market but by the end of the year price growth could be 2% higher.
The slowdown in growth in 2017 is expected to hit all regions and this will still be felt during the first few months of next year then by 2019 the firm predicts that annual price growth could reach 3%.
Greater London is likely to see price growth slow to zero in 2017 before rising by 2.5% in 2018 and 4% in 2019. After two years of falls, the prime central London market will see price growth of 2% in 2017, followed by 4% and 5% respectively in the next two years.
The forecast also suggests that across the South East and East of England price growth will slow in 2017 to 1.5% and 3.5% respectively. In 2018 prices in these areas will rise 2.5% and a slower 2% respectively and a similar path for house prices in the South West is predicted with growth of1.5% to 2%.
However, house price growth will slow in the North, the Midlands and Wales. The North East is expected to see no price growth this year, and to increase to 1% in 2018 and 2.5% in 2019. Price growth in the North West, Yorkshire and Humberside and the Midlands will follow a similar pattern of weaker annual price growth in 2017 and 2018, rising again in 2019.
In Scotland the forecast says that annual price growth of 1.5% in 2016 is set to fall to 0.5% in 2017, then rising to 2% in 2018 and then 3% in 2019.
The report explains that weaker economic conditions will act as a brake on price growth as inflation eats into household incomes. Countrywide expects interest rates to begin to rise very slowly, from the spring/summer of 2018 but for wage growth to rise also, helping household budgets to recover.
Rising interest rates and a more cautious approach from lenders, partly directed by the regulator, will prevent a faster increase in price as wage growth picks up, it explains and as Brexit negotiations continue, confidence will be volatile which will have implications for the pace of economic and housing market recovery.
The outcome of Brexit negotiations is the biggest risk to performance and is weighted to the downside, the report adds.
Also, despite little recovery in the levels of housing transactions, due to affordability issues and fewer buy to let purchases, the rate of new building is not expected to gather enough pace over the next two years to catch up with previous shortfalls. A lack of supply will therefore continue to support the level of price growth, it says.
‘Economic conditions for households will remain challenging over the next year as inflation eats into budgets and interest rates begin to rise. In addition, fewer landlord purchasers and the later age at which people buy, is affecting the level of demand,’ said Fionnuala Earley, Countrywide’s chief economist.
‘But we expect the UK economy to recover and wage growth to pick up in response to global growth. That, combined with a continued lack of housing supply, will help to support house prices,’ she pointed out.
‘The housing market is sensitive to confidence which will be affected by the outcome of Brexit negotiations and the implications this will have, particularly on employment,’ she added.