Nationwide's Chief Economist, Robert Gardner, comments:
“The annual rate of house price growth was little changed in February at 4.5%, only slightly higher than the 4.3% recorded in January. House prices increased by 0.6% over the month, after taking account of seasonal factors.
Recent data suggests that the UK economy has continued to perform relatively strongly. The economy accelerated slightly in Q4, expanding by a healthy 0.7% quarter-on-quarter, and the unemployment rate remained stable at an 11-year low of 4.8%.
The outlook is uncertain, but we, along with most other forecasters, expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.
Nevertheless, in our view a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices.
Cash buyers are a more important driver of housing market dynamics than they were a decade ago. Though the data1 only extends back to 2005, it suggests that the share of cash transactions increased significantly from around 20% in 2005/06 to around 35% in 2008 and has remained fairly constant since then.
The sharp increase in the share of cash purchases in 2007 and 2008 was a function of mortgage transactions declining sharply, rather than the amount of cash transactions increasing (see chart below). This reflects the impact of adverse labour market conditions and the tightening of credit conditions during the financial crisis, which limited the number of people able to buy with a mortgage, while fewer such constraints would have applied to cash purchasers."