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Nationwide's Robert Gardner comments on their January 2017 HPI:
“The annual rate of house price growth remained broadly stable at the start of 2017at 4.3%, only modestly below the growth rate in December of 4.5%.
House prices increased by 0.2% over the month, after taking account of seasonal factors.
The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly. “On the one hand, there are grounds for optimism.
However, there are tentative signs that conditions maybe about to soften. Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed, as shown in the chart (above, right).
With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect.
On balance, we agree with the consensus view that the economy is likely to slow through 2017 as the squeeze on household budgets intensifies and heightened uncertainty weighs on business investment and hiring.
“The annual rate of house price growth remained broadly stable at the start of 2017at 4.3%, only modestly below the growth rate in December of 4.5%.
House prices increased by 0.2% over the month, after taking account of seasonal factors.
The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly. “On the one hand, there are grounds for optimism.
The economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11-year low in the three months to November.
However, there are tentative signs that conditions maybe about to soften. Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed, as shown in the chart (above, right).
With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect.
On balance, we agree with the consensus view that the economy is likely to slow through 2017 as the squeeze on household budgets intensifies and heightened uncertainty weighs on business investment and hiring.
Nevertheless, we continue to believe that 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"
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