Growth in cost of homes set to slow in 2017

House prices will continue to go up, but the rate of growing value will slow in the new year, reports Halifax bank.  Picture: Rebekah Downes/PA Wire
House prices will continue to go up, but the rate of growing value will slow in the new year, reports Halifax bank. Picture: Rebekah Downes/PA Wire
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A new forecast suggests house prices will edge higher still in the new year but the rate of growth will slow as household spending is squeezed.

By the end of 2017, the Halifax bank expects annual house price growth across the UK to be running between one and four per cent, compared to the annual rise of 10 per cent seen in March this year.

The bank said the wide range for its forecast “reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy next year”.

Lower levels of house sales could take place as more people respond to weaker economic conditions and a deterioration in housing affordability by not buying or moving home, according to its forecast.

Activity in the buy-to-let sector is also predicted to cool further too, as tax changes eat into landlords’ profits.

House price growth in London is forecast to slow more sharply than elsewhere, as affordability there is already stretched.

Halifax’s housing economist, Martin Ellis, said: “The housing market is critically dependent on how the wider economy evolves. We consider it most likely that the UK economy will soften over the course of 2017.

“This is most likely to result from the weakening of sterling pushing up import costs and dragging on purchasing power, both for consumers and as a determinant of business investment spending.”

Mr Ellis added: “Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment. This deterioration in the labour market, together with an expected squeeze on households’ spending power - as inflation picks up and outpaces earnings growth later in the year - is likely to curb housing demand.

“These factors, combined with increasing affordability constraints, are likely to result in a further easing in annual house price growth.”