UK house prices beat forecasts but sharp slowdown expected next year

Update: London’s housing market underperformed the rest of the United Kingdom for the first time in eight years as buyers increasingly found themselves stretched by affordability, according to Nationwide Building Society.

Home prices in the capital rose 3.7 per cent in 2016 from a year earlier, down from 12.2 per cent in 2015, the mortgage lender said on Thursday.

“London’s significant period of outperformance may be drawing to a close,” said Robert Gardner, the chief economist at Nationwide. “In London and the south of England, more people have found themselves priced out of the market or had to borrow a greater multiple of their income, although low interest rates have helped reduce monthly mortgage costs.”

British house prices rose faster than expected in December but the pace of growth is likely to slow in 2017 amid uncertainty about economic developments, the mortgage lender Nationwide said on Thursday.

Annual gains stood at 4.5 per cent in December, up from 4.4 per cent in November. Economists polled this month by Reuters had expected to see growth of 3.8 per cent.

Britain’s property market slowed immediately after the vote in June to leave the European Union, but since then the economy has fared better then many economists expected and house prices have continued to rise.

Nationwide reiterated a forecast that house prices are likely to grow by about 2 per cent in 2017, although the figure would depend on how the economy fares.

“The fact that the housing market is seemingly struggling to build momentum after coming modestly off its August lows reinforces our suspicion that it is likely to find life increasingly difficult as 2017 progresses,” said Howard Archer, the chief UK and European economist at IHS Markit.

Nationwide said low interest rates and a shortage of homes are expected to underpin support for prices.

Bovis Homes said on Wednesday it would not deliver the number of houses it originally expected in 2016, after about 180 sales failed to complete before the year end, resulting in a likely miss against market profit forecasts.

In December alone, house prices rose 0.8 per cent after stagnating in November, Nationwide said. While the month-on-month measure can be volatile, this marked the biggest rise in a year.

Nationwide said 2016 was the first year since 2008 that house price growth in London was slower than the British average.

* Reuters

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