Home prices flatline over uncertainty

HOUSE prices edged up modestly last month, rising for the first time in four months, data will show this week.

Analysts and economists believe that the Halifax house price index will say that the annual growth rate for the three months to the end of December was 0.4 per cent.

That compares to the 0.3 per cent recorded for November, which was the slowest growth rate seen in six years.

House prices were growing at an annual rate of 3.7 per cent in August, but since then growth has collapsed as fears over the health of the economy and uncertainty over Brexit have made potential homebuyers more wary.

The growth rate has been steadily falling since March 2016, when it hit 10 per cent. Last week, Nationwide said that UK house price growth had slowed noticeably as 2018 drew to a close.

MPs will get their chance to vote on Prime Minister Theresa May’s proposed Brexit deal the week beginning January 14. It had been scheduled for December 10 but was called off by May as it looked doomed to be defeated. May promised to return to Brussels to seek further concessions from the European Union, but left empty-handed.

Howard Archer, chief economic advisor to the EY ITEM Club think tank, said that if Britain leaves the EU at the end of March without a deal house prices could fall around five per cent this year due to “heightened uncertainty and weakened economic activity”.

However if there is a deal, he said prices could rise by two per cent for 2019. Archer added that rising real incomes, low interest rates, high employment and a shortage of housing stock should support prices.

“The downside for house prices should be limited by the shortage of houses for sale,” he said.

“High employment is also supportive for the housing market while mortgage interest rates are still at historically low levels and still will be assuming that the Bank of England does raise interest rates gradually and to a limited extent.”