Summary

Our forecasts for 2017 anticipated a high level of uncertainty as Brexit negotiations started. The announcement of a General Election on 8th June is part of this uncertainty and has not yet prompted a change in our expectations. We continue to expect slow or negative house price growth and subdued transaction levels, at least in the short term.

In line with this, Nationwide reported a second consecutive month of house price falls in April 2017. House prices fell -0.4%, according to their index. The RICS survey results were unchanged in March. It reported continued falls in the number of new instructions and the number of surveyors reporting an increase in buyer enquiries remains about equal to the number reporting falls. Transaction volumes were 10% lower over the last six months compared to the same period the previous year. This varied from 23% lower in London to only 3% lower in Scotland and Wales.

GDP growth came in at half the expected rate at the end of Q1 2017, at only 0.3%. It is anticipated the Bank of England will reduce its GDP forecast for the year following the weak first quarter. Meanwhile, inflation (CPI) has risen ahead of expectations to 2.2% in March. Household lending data from March shows a continued appetite for unsecured borrowing. This may mitigate the effect of inflation on consumer spending power in 2017, but is not a long term fix.