In December, the Bank of England Monetary Policy Committee voted unanimously to keep the base rate at 0.25%. Mortgage rates have continued to fall and approvals have returned to pre-referendum levels. The RICS reported no change in the number of properties coming to the market in November, while demand levels rose slightly. This matches our expectation that there will be very little change in house prices either up or down in 2017. Despite recent stability, we expect transaction volumes to fall in 2017.
Residential transaction volumes have stabilised and house prices are likely to be static in 2017
Summary
House price growth has slowed substantially over recent months. This has been most noticeable in London and the South East. However, Nationwide reported 0.8% growth in UK house prices in December after two months of no growth. This may be the first sign of the strengthening price growth anticipated by the RICS survey, but it is only one month of data.
Any current price growth may be short-lived. Consumer confidence stayed robust through to the end of 2016 despite the uncertainty presented by Brexit. It is anticipated that 2016 will have seen the strongest growth in consumer spending for nine years. However, there are growing signs that consumers will find life much tougher in 2017. Recent employment data has been weak and the expected rise in inflation is starting to come through with wages unlikely to keep pace.