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House prices rebound but market ‘will cool’ in 2017

by: Heather Greig-Smith
  • 12/01/2017
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UK house prices rebounded in the fourth quarter of 2016, according to the Halifax House Price Index.

The economists who compile the index said the figures are encouraging, but that rising inflation is likely to cool the housing market and restrict growth in 2017.

Scotland and the north of England led the charge, with the fastest rates of house price inflation – 6.5% and 6.3% respectively. However, Wales and Northern Ireland experienced the largest declines, falling 6.4% and 2.0%, followed by East Anglia at -1.5%.

The UK’s overall 2.7% rise in the three months to December contrasts with a 0.6% decline in prices in the three months to September.

On an annual basis, UK house prices were 6.5% higher than at the same time in 2015. While positive, this is a slowdown from the peak of 10.1% in the first quarter of 2016.

Chris Williamson, chief business economist at IHS Markit, said: “The recovery of house prices in the fourth quarter adds further evidence that the UK economy has shown encouraging resilience amid Brexit uncertainty.”

“However, with rising inflation set to eat into household spending power in the coming year and Brexit uncertainties expected to intensify, it’s likely that the housing market will cool as we move through 2017. IHS Markit expects prices to rise by just 2% in 2017.”

The standardised UK property price has risen £13,431 from December 2015, and is now £219,556.

Nine of the UK’s 12 regions recorded higher property prices during the quarter. London experienced its first upturn since Q1 2016, with a rise of 2%. However, its annual growth rate of 7.0% is the lowest for three-and-a-half years – a contrast from its 16-year peak at the start of 2016 (21.2%).

On an annual basis, Northern Ireland saw the fastest rate of inflation (12.8%) but its house prices are still 42% below pre-financial crisis peak levels.

Seven of the UK’s regions have now seen house prices rise above their pre-financial crisis peak, with the North West joining them for the first time.

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