House price growth to slow to 1%

House price growth to slow to 1%

House price growth is expected to slow to 1 per cent in 2018 amid slow wage growth and continued political uncertainty, according to Knight Frank.

The estate agent forecasts UK house price inflation will slow from the 1.5 per cent witnessed in 2017, held back by deepening affordability pressures and property taxes.

Stronger gains are expected in northern areas and the Midlands, in a continuation of a trend that has emerged over the past year.

The north east, East Midlands and West Midlands are set to see increases of 2 per cent, according to the estate agent.

In contrast, average prices are expected to drop by 0.5 per cent in London and remain flat in the south east.

Assuming a successful Brexit deal is negotiated, the long-term forecast sees house price growth pick up once more from 2018, increasing to 4 per cent by 2022.

A spokesman for Knight Frank said: “The UK may now be entering a period of interest rate rises, but even so, we expect rates to be low compared to long-term norms by the end of the forecast period. 

“While development levels are rising across the country, the shortage of new homes is unlikely to be fully reversed in the coming years, and that will underpin pricing."

A number of indicators have pointed to muted house price growth across the UK, and a recent report from Zoopla revealed homeowners were being forced to sell their homes at almost 4 per cent less than the asking price.

But the regional picture is more varied, with cities such as Manchester consistently witnessing year-on-year growth of 7 per cent or more, according to the Hometrack UK Cities index.

This is partly due to shifts in the buy-to-let market, with higher stamp duty costs and cuts to tax relief on mortgage interest prompting landlords chasing higher yields to look further north.

Ian Gwinnell, director at Stafford-based All Counties Financial, said he did not necessarily think an influx of landlords buying buy-to-let properties was causing stronger growth in the Midlands.

He said: “Whereas anything south of Oxfordshire would have experienced really big growth in years gone past, it would be a case of the rest of the country catching up a bit.

“The Midlands is experiencing economic growth, and, as a result, prices are starting to move – that could be the driving factor behind it all.”