Posted: 15/02/17 by PwC LLP
Experts at PwC believe the final official housing figures for 2016 show a strong end to the year.
Commenting on the UK House Price Index out yesterday, Richard Snook, senior economist at PwC, said: “The official ONS and Land Registry house price figures showed that average UK house price inflation was 7.2% in the year to December, up from 6.1% in November. This takes total inflation rate for 2016 as a whole to 7.6%, up from 6.0% in 2015. The average price of a UK home is now £220,000 with the typical homeowner making a £15,000 capital gain over the last 12 months, compared to the median UK full-time salary of £28,000.
“While good news for existing homeowners, however, this further rise in property prices – at four times the rate of consumer price inflation and more than double average earnings growth – will take home ownership even further out of reach for Generation Rent.
“The good news for prospective future buyers is that we do expect a gradual slowdown in house price inflation in 2017 with our scenarios ranging from between 2% and 6% growth. There are several headwinds affecting the housing market over the next couple of years: uncertainty related to Brexit, rising consumer price inflation with consequent downward pressure on real earnings growth and, in the longer run, the potential for a supply increase due to initiatives in last week’s White Paper.”
Commenting on the ONS consumer price figures out yesterday, Andrew Sentance, senior economic adviser at PwC, added that: “UK inflation has picked up again this month to its highest level since 2014. But the increase was less than many were expecting. The impact of rising petrol and food prices was dampened by discounts on clothing and footwear.
“The trend is clearly towards higher inflation, however, and we should expect the rate of price increases to rise above the 2pc Bank of England target in the next few months. By the end of this year, inflation is likely to be around 3pc and possibly even higher. Rising energy prices and the weakness of the pound are the main factors behind this expected increase.
“The continued rise in inflation will squeeze consumer spending and dampen growth in 2017 and 2018, but despite this we still expect GDP to rise by around 1.5 % this year and next.”