Market activity remains subdued, but there is steady price growth
Summary
House price growth increased to 0.6% in February according to the Nationwide index. The last few months have been particularly volatile, although no single month has been far from the average 0.4% monthly house price growth recorded since 2014.
It remains unlikely that this level of price growth will continue through the year. Although the ONS second estimate increased GDP growth in Q4 2016 from 0.6% to 0.7%, business investment was down 1.5% over 2016, its first annual fall since 2009. The Institute for Fiscal Studies does not expect average household income to grow at all over the next two years. Inflation, measured by CPI, reached 1.8% in February 2017, with further rises expected throughout the year.
The RICS survey reported a fall in the number of new instructions in January 2017 and fewer surveyors reported growth in buyer enquiries than in December. This is consistent with our expectation that transaction volumes will be subdued throughout 2017. The full effects of the SDLT change in April 2016 are gradually becoming clear. One outcome appears to have been an 8% fall in home movers during the last six months of 2016 compared to the same period in 2015. At the same time, first time buyers have increased 7% and were equal in number to home movers over the last six months of 2016, for the first time since the mid-1990s.