House price growth to remain low in 2018: Halifax

The main driver of this forecast is the continuing effects of this year’s squeeze on spending power as inflation has outstripped wage growth and the uncertainty regarding the prospects for the UK economy next year.

The continuing imbalance between supply and demand is also predicted to support house prices. The Bank says both demand and supply pressures in the market have "altered little during the course of 2017, and this has been the key reason for the lack of direction in either sales or prices at a national level".

However Halifax says higher levels of housebuilding could help bring supply and demand into better balance and contain the upward pressure on prices over the medium and longer terms.

Despite this, slow house price growth in the South East and London is expected to continue into 2018.

At 9.1% in Q3 2017, the North saw the steepest annual rate of house price growth, followed by the East Midlands and the North West. London was the weakest performing English region with an annual rate of 2.6%, down from a recent peak of 21% in Q1 2016. In the South East, for the first time in three-and-a-half years, house prices increased at a softer pace than the UK as a whole.

Halifax says the changes to Stamp Duty announced in the 2017 Budget "should provide a boost for those hoping to take their first step on to the property ladder". The number of first-time buyers getting on the housing ladder has now exceeded 150,000 for the third time in four years – a level of momentum not seen since before the financial crisis.

For the UK economy as a whole, Halifax says that even with inflation expected to fall, "household budgets are likely to remain strained in the absence of accelerating wage growth".

The Bank believes because of the heightened uncertainty and a slowdown in household spending, "there is an expectation for slower economic growth in 2018", though unemployment is likely to remain low.

Halifax Bank’s Managing Director, Russell Galley, commented: “The UK housing market in 2017 followed a similar pattern to the previous year. House price growth has slowed, whilst building activity, completed sales and mortgage approvals for house purchase have all remained flat. This is driven by a combination of the continuing uncertainty regarding the future of the UK economy, and the ongoing challenge for prospective buyers to build up the appropriate deposits to support purchases.

“On the flip side UK House Prices in general are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment. Despite the recent rate rise we do not expect this to have an adverse impact on transactions. A further rate rise is not seen as imminent and we may not see one until the latter part of 2018, if at all."