December produces surprise surge in house prices

Why did UK house prices rise in the final month of 2016, confounding analysts’ forecasts?

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UK house prices jumped 1.7 per cent in the final month of 2016 to record their biggest leap since March and to confound analysts' forecasts of a 0.3 per cent rise in December, according to the latest index from the Halifax.

Halifax House Price Index increased by 6.5 per cent

The bank warned, however, that a combination of factors could have a depressing effect on demand during 2017.Halifax's House Price Index rose 6.5 per cent over last year bringing the average property value across the UK to £222,484 by the end of December.Martin Ellis, Halifax's housing economist, commented, "Slower economic growth, pressure on employment and a squeeze on spending power, together with affordability constraints, are expected to reduce housing demand during 2017."Overall, annual house price growth nationally is most likely expected to slow to one to four per cent by the end of 2017. The relatively wide range for the forecast reflects the higher-than-normal degree of uncertainty regarding the prospects for the UK economy this year."

Outlook for the UK housing market remains weak

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, agreed that, despite the pick-up in prices at the end of 2016, the outlook for the market remained weak. "The surge in house prices in December should not be read as a sign that the housing market is fizzing," he said."Halifax's measure is much more volatile than others; it increased by more than one per cent month-to-month in five months in 2016. The three-month average of the year-over-year growth rate is a much better guide to the underlying trend; it remains significantly weaker than before the referendum."
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Was there a Brexit effect on the housing market?

Mario Berti, CEO of Octopus Property, added, "People who predicted the worst for the UK property market in the wake of the EU referendum vote last June have so far been proved wrong."While the economic and political backdrop remains uncertain in the wake of Brexit, tight supply, high levels of employment and very low borrowing costs are acting as a floor under prices. Sterling weakness will also continue to attract foreign buyers, again bolstering prices."With both supply and borrowing costs so low, an imminent collapse in house prices looks like a remote risk. But there are storm clouds ahead, particularly in the form of rising inflation, which has the potential to hit consumer sentiment, and house prices, hard."Rob Weaver, director of investments at property crowdfunding platform Property Partner and a member of British Property Federation residential committee, added, “Four months in a row and still climbing. Some feared house prices could nosedive post-Brexit but they’ve remained reassuringly resilient with a robust December.“Despite an easing in annual growth, due largely to falling demand from investors, house prices have stayed stable. Scarcity of supply is underpinning the market with a near 30-year low in available homes for sale adding to the continuing issue of not enough residential properties being built.“And with interest rates at rock bottom, there’s still a seemingly strong appetite from buyers whether first-time or those hoping to move up the ladder."

New UK property listings down by 46.9 per cent in December 2016

Publication of the Halifax report coincided with the release of the latest Property Supply Index from online estate agents HouseSimple.com, which showed the seasonal slowdown in property supply was sharper than usual in December, with new property listings across the UK down by 46.9 per cent last month.The UK as a whole saw new property supply fall in almost every town and city in December, with new listings lower than at any point over the course of the past year. To compile the Index, HouseSimple looked at data on more than 500,000 listed properties to track the number of new properties marketed every month in more than 100 towns and cities across the UK.Alex Gosling, chief executive of HouseSimple.com, commented, “The run-up to Christmas is chaotic, so most people wait until January to put their house on the market. As a result, a slowdown in new listings is pretty typical. But the December just gone was particularly slow, and the fear is that this steep drop-off could hail the start of a more tentative market as inflation starts to rise and people feel less confident financially. How the job market and economy perform will be critical for the property market in the months ahead.”Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit