The average house in Britain will be worth £220,000 this year – up £9,000 on 2016 levels – as the property shortage continues to drive values higher.
New forecasts by the Centre for Economics and Business Research (CEBR) predict a 4.4pc rise in 2017, the lowest level since 2013 and significantly below the increases of 6pc to 8pc seen in the intervening years.
The think-tank’s economists attribute the slowdown to a combination of pay rises failing to keep up with inflation as economic uncertainty over the Brexit vote weighs and higher levies on property such as increased stamp duty on second homes.
However, over the following years worries are set to ease with the average UK home expected to be worth £272,000 by 2021.
A fundamental driver behind the rise is the country’s continuing property shortage, with the CEBR pointing out the government’s own white paper on housing states that 40pc of local planning authorities say they do not know how they will meet local housing demand over the next decade.
By other measures the market is proving buoyant, with the mortgage approvals – a leading indicator for the health of the market – at just below 70,000 a month, close to the post-crisis high of 74,000 in 2014.
Interest rates at record lows introduced in the wake of financial crisis and then further reduced by the Bank of England in the wake of the EU referendum to just 0.25pc have also helped prop up the market, by holding down the cost of mortgage repayments.
“Already towards the end of 2016 indicators have pointed to a stabilisation in the housing market, a trend which has continued in the first months of 2017,” said economist Kay Daniel Neufeld, who produced the CEBR report.
“Transaction numbers are slowly recovering from the introduction of a stamp duty surcharge on second homes in April 2016, which has led to considerable distortions in the market. Mortgage approvals, while still low by historical standards, are nearing post-crisis heights, boosted by low interest rates and favourable borrowing conditions.”
The economist warned that risks to house price rises remain, with rising inflation and stagnating wage growth two of the key concerns.
These will result in the relatively low price rise this year and an increase of just 4.1pc in 2018, before climbing back to between 5.7pc and 6.1pc in the following years.
Source: The Telegraph