Mortgage interest rates remained stable in December and the number of mortgage approvals continued at pre-referendum levels. The RICS reported no change in the number of properties coming to the market in December and fewer surveyors reported an increase in buyer enquiries than in December 2016. We expect this subdued level of activity to continue throughout the year, although the effect of the 3% additional SDLT for “additional homes” is not yet fully understood. Additional homes made up one in five purchases in the second half of 2016 but the split between buy-to-let, bridging and second homes remains unclear.
House price growth has slowed and market activity remains subdued
House price growth slowed from 0.8% in December down to 0.2% in January 2017, according to the Nationwide index. This follows a period of relatively strong growth in the last two months of 2016.
This slowdown is in line with our forecasts, which anticipate no house price growth in 2017. The stronger than expected GDP growth in Q4 2016 (0.6%) was driven by strong consumer spending. Higher wage growth in 2016, partially a consequence of low unemployment, has been offset by rising inflation. The Consumer Prices Index (CPI) reached 1.6% in December and is expected to rise to 3% by December 2017, which will limit consumer spending power and house price growth.