2017 housing forecast: demand to fall but prices to rise
It admitted that the wide range for the forecast reflects the higher than normal degree of uncertainty regarding the prospects for the UK economy this year.
The lender reckons that housing demand will fall in 2017 due to slower economic growth, pressure on employment and a squeeze on spending power.
As a result they’ll be fewer house sales as more people respond to weaker economic conditions by not buying or moving home.
Despite this drop in activity, it predicts house prices will be supported by an ongoing shortage of property for sale, low levels of housebuilding, and low interest rates.
Halifax’s housing economist, Martin Ellis, said: “Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment. This deterioration in the labour market, together with an expected squeeze on households’ spending power – as inflation picks up and outpaces earnings growth later in the year – is likely to curb housing demand. These factors, combined with increasing affordability constraints, particularly in London and the South East, are likely to result in a further easing in annual house price growth during the coming year, continuing the trend seen since the spring of 2016.
“The level of uncertainty around any economic forecast is higher than usual at present. It’s very difficult to predict the likely path for both consumer and business confidence during 2017, due to a wide range of possible outcomes regarding the extent of the expected worsening in labour market conditions and the size of the squeeze on purchasing power.”
Interest rates on hold?
A near-term interest rate cut is now highly unlikely unless the economy shows signs of deteriorating significantly, according to Halifax, which noted that the bar required for a rate rise is high.
Ellis added: “When the time finally comes for the first rise in official interest rates – most likely not until 2018 at the earliest – the Bank of England is expected to adopt a cautious approach, partly due to concerns about many households’ ability to make higher repayments on their debts. Interest rates are, therefore, likely to rise at a gradual pace.”