Another major forecaster says price rises will be sluggish next year

The Nationwide is the latest major industry forecaster to predict a sluggish average house price rise of two per cent in 2017.

“House price prospects will depend on the wider economy, around which there is a larger degree of uncertainty than usual” explains Robert Gardner, Nationwide's chief economist.

“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth. But we continue to think a small gain (around two per cent) is more likely than a decline over 2017 as a whole” he adds.

Gardner believes that low interest rates will continue to underpin demand while a shortage of homes on the market will continue to provide support for house prices.

“The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years' worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead” he says.

Gardner believes this year will end with average rises of four to six per cent over the entirety of 2016 - although he admits that policy changes such as the stamp duty surcharge, which prompted hectic buying early in the year, makes it difficult to assess the true state of the market over the whole 12 month period.

“The picture was further obscured by the gyrations of some forward-looking indicators of economic activity and consumer sentiment in the wake of the Brexit vote, where a number of indicators recorded large, but short-lived, declines” he continues.

“However, what made the most difference to the market in 2016 was that the fundamentals underpinning housing demand remained solid.  Labour market conditions were robust, with strong employment growth, healthy gains in real wages (thanks in part to low inflation) and borrowing costs falling to new record lows.”