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House price predictions for 2017

Sunday, May 14, 2017

A rise in stamp duty, the Brexit referendum and outcome and now a snap call for a general election is enough to have experts scratching their head in bafflement at what the future of the housing market will look like.

Certainly buyers of a four-bedroom family home in London need deep pockets - but perhaps not as cavernous as a year ago. Asking prices in the capital for these top-of-the-ladder properties fell by 8.7% over the past year, according to search site Rightmove. House prices grew much faster in eastern England and the West Midlands than in London, according to Zoopla.

London's annual house price growth for 2016 (3.7%) was below the UK average of 4.5% for the first time since 2008, the Nationwide Building Society says. So has the London bubble burst? And since London is always seen to be a law unto itself, what are the implications for the rest of the country?

The average house price in the capital is still £474,000, more than double the typical price of £217,000 in the UK as a whole, according to the latest official figures from the Office for National Statistics (ONS). The slowdown in central London is the result of the most significant change in the housing market in 2016 - a stamp duty surcharge on buy-to-let and second homes. Since April, anyone buying a home that is not their main residence has had to pay a 3% stamp duty surcharge. This meant that, for second homes or buy-to-let properties, the rate for properties priced at more than £1.5m reaches 15%.

The surcharge led to a burst of activity in March followed by a steep drop in transactions in April - a "hangover" that still persists, according to Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics).

The new surcharge, alongside a rise in normal stamp duty costs for £1m-plus homes since 2014, had a bigger impact on the market than the Brexit vote in June, according to experts. Ray Boulger, of John Charcol mortgage brokers, says it led to many at the expensive end of the market choosing to extend their homes rather than move. This made it more difficult to create chains lower down the market.

Ed Stansfield, chief property economist at Capital Economics, says the housing market recovered "remarkably quickly" after cooling immediately after the UK's vote to leave the EU. He says a "degree of nerves" surrounding the economy and potential buyers' caution over stretching too far financially had kept a lid on house prices.

Another major factor in the market over the last 12 months, according to the experts, is a lack of homes going on to the market. This supply squeeze has meant that, despite all the other pressures on affordability, prices continued to increase.

UK house price forecasts for 2017

  • Henry Pryor, property commentator predicts a 4% fall
  • Ed Stansfield, Capital Economics predicts a 2% rise
  • Ray Boulger, John Charcol mortgage brokers predicts a 1% rise
  • Simon Rubinsohn, Rics predicts a 3% rise
  • Robert Gardner, Nationwide building society predicts a 2% rise
  • Martin Ellis, Halifax  predicts a 1% to 4% rise

Some see first-time buyers as key to the buoyancy of the housing market. "First-time buyers still underpin the wider market. So long as the government continues to support them either directly via Help to Buy or by further tax changes then the market should not plunge but this is not completely in the gift of politicians who frankly have more pressing matters to attend to," says property buying agent Henry Pryor.

The experts have a relatively wide spread of predictions for 2017 - from price falls overall to rises matching or outstripping the general level of inflation. Martin Ellis, housing economist at mortgage lender the Halifax, is offering a hedge-your-bets prediction of between a 1% and 4% rise. "The relatively wide range for the forecast reflects the higher-than-normal degree of uncertainty regarding the prospects for the UK economy next year," he says.

Given that a buying a home is the biggest financial transaction of most people's lives, they - and their mortgage lender - will want some certainty over their job and income before taking the plunge.

Report and information taken in part from an article written by Kevin Peachey Personal finance reporter

Important Information
All property sales and the financial advice that surrounds them are as unique as the people engaging in the transaction. It is important to not make a decision without seeking professional advice. If you want to sell your home and are considering redecorating before marketing, speak to one of our Property Professionals to get the best advice for presenting your home for sale before making any investment.

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