There is no denying 2017 was a challenging year for the housing market – uncertainty over Brexit, tighter lending criteria, high stamp duty, an interest rate rise and falling real wages.
Despite the circumstances, prices continued to rise, albeit in a more subdued manner than previous years. In fact, all of the main indices ended on a positive note, with average growth rates of around 3.3% compared to 5.97% in 2016 and 6.37% in 2015.
It was, as ever, a mixed picture across the country. What is clear is that London’s spectacular growth over the last decade has now come to an end, with many of the main indices turning negative for the capital in 2017.
According to the Halifax, London’s house prices dropped by 0.5%. Cheltenham’s prices, in contrast, saw some of the biggest rises – up by 13%. Bournemouth’s were next, up by 11.7% and Brighton’s by 11.4%. According to the Nationwide, the West Midlands topped the regional growth table for the first time – up 5.2%, East Anglia saw the biggest slowdown, dropping from 10.1% (2016) to 2.3% (2017) and London saw the biggest decline at -0.5%.
As many of the commentators point out in their predictions, below, most of the issues that made 2017 such a tricky year are likely to continue into 2018. As a result, many are expecting flat or low growth this year across the UK and small price falls in London.
It is not all bad news – the recent reduction in stamp duty for first time buyers (FTBs) could well stimulate the market, with a knock-on effect for second stepper homes. And they will be fighting over limited stock as the supply shortages we have seen in recent years also look set to continue. In addition, the economy and employment levels are both faring far better than expected.
And, a recent Yougov poll found that many believe 2018 will see rising house prices and secure employment. It’s a level of confidence that is evident in the early Christmas retail figures, which are looking far healthier than expected.
However, there is likely to be another rate rise this year. And, as we enter a more complex phase of negotiations over Brexit, confidence will bounce up and down with each new success and setback. It will only settle down once we know the full details of the trade deal we’ll have with the EU and that might not become clear until some time in 2019.
Please note – where possible, final figures for 2017 are from the commentators’ own indices:
Nationwide’s indices recorded growth of 2.6% in 2017, which was at the lower end of their prediction of 2%-4%. This year they are predicting growth to slow to 1%, but they note that this is dependent on Brexit negotiations. In the longer term, they expect prices to rise in line with earnings (around 3%-4% per annum).
Halifax’s figures were more or less in the middle of their expectations. They had predicted growth of between 1%-4% in 2017, against a final figure of 2.7%. They also correctly forecasted price falls in Central London. This year, like most commentators, they have predicted prices will rise more slowly, at between 0-3%.
Hometrack were somewhat pessimistic in their predictions of city level house price growth of 4% when compared to their actual figure of 6.3% and were similarly pessimistic in their forecast of nominal price growth in London (actual: 2.7%). This time around, Hometrack have made some of the more optimistic predictions for the year ahead – with city wide growth of 3% and 5% for the top twenty cities and a 1% rise in London.
In 2017, Rightmove expected price rises to fall to 2% against a final figure of 1.2%. They were more downbeat about Inner London, expecting prices to come down by 5% against a final figure of 3.9%. However, the 3% rise they predicted for outer London was overly optimistic compared to the actual figure of 0.4%. In 2018, they believe average prices will rise by 1%, but by 3% for first time buyers and 2% for second steppers. At the same time, they believe there will be a 2% fall in both top end and London property.
RICS (Royal Institution of Chartered Surveyors)
RICS were predicting a rise of 3% in house prices in 2017, which was pretty close to the average across the indices (3.3%). This year they haven’t given a precise figure, but believe prices will drift higher in Northern Ireland, Scotland, Wales and the North West of England, but slump in London and the Southeast, resulting in flat or negligible average growth. They are also expecting sales volumes to fall by around 5%.
NAEA (National Association of Estate Agents)
In 2017 the NAEA’s agents were some of the most pessimistic of all the forecasters, 43% of whom expected prices to stay more or less the same during the year against a rise of 2.65%.
This year 43% of agents expect prices to fall, 44% believe prices will remain the same and 60% expect an increasing number of homeowners to improve rather than move.