The UK property market is set to stagnate over 2017 but there is likely to be considerable regional differences with prices falling in London, according to new research.
Significant growth will still be found in the East and West Midlands as well as in Scotland, according to the outlook report from property firm Home.co.uk.
The prediction comes as data from Home.co.uk’s asking price index shows how a slowdown which began three years ago in the prime central London market has started to ripple out across the regions.
Currently Greater London is the UK’s worst performing region with prices falling 0.4% over 2016 and the report says that this trend of modest price falls in the capital will continue next year as the supply of property for sale continues to rise.
Lack of supply has been keeping prices moving up but now the number of properties on the market in Greater London rose by 19% between November 2015 and November 2016.
In the South East and the East of England, two areas that have also experienced rapid price growth in recent years, price falls will not be as pronounced and the report predicts that values will be flat across both regions as marketing times increase and the supply of property grows.
The supply of property for sale in the East of England rose by 30% between November 2015 and November 2016, and by 27% over the same period in the South East.
A 10.6% annual rise in prices in the East of England saw the region emerge from 2016 as the best performing property market. However, the report says this is unlikely to be repeated next year given the rapid increase in both supply and high pricing.
The South East of England’s annual price rise of 3.2% in 2016 is also unlikely to be repeated given the region’s similarly rapid rise in supply and a 0.8% monthly fall in prices recorded in December.
In contrast, the report predicts that property prices in the East and West Midlands and in Scotland will rise modestly as there have been only moderate supply increases in 2016. This lack of supply is most pronounced in the West Midlands, where the number of properties on the market rose by just 5% over 2016.
The North of England’s property market is set to remain precarious over 2017 as this year’s stalling of prices continues. Asking prices rose by only 2.3% in Yorkshire and the Humber, by 0.5% in the North East and by 3.7% in the North West during 2016.
‘It is clear that the UK property market is no longer in great shape,’ said Home.co.uk director Doug Shephard but he urged caution in blaming Brexit.
‘The super low interest rates imposed by the Bank of England in the wake of the financial crisis acted like steroids on any regional market that still showed a flicker of life. Consequently, prices in the nation’s leading property market, Greater London, soared for almost seven years but 2016 saw this market hit the buffers,’ Shephard explained.
‘The same symptoms of overvaluation are now evident in the South East and East of England. Home prices have gone beyond affordability limits, rental yields are consequently low and the number of new instructions is on the rise in both regions,’ he added.
‘Should the fate of the South East and East of England markets be to follow the pattern set by London, 2017 will be a difficult year and may even herald a very different chapter in the story of the UK property market,’ he added.
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