Residential property prices in the UK remained broadly stable in 2016 but is likely to slow next year, the Nationwide has said.
According to the building society’s latest House Price Index, the average price of a home has increased by 4.5% over the last 12 months, the same level as in 2015.
But it forecasts that UK property price growth will slow to around 2% in 2017 as the economy weakens.
All regions saw house price growth in 2016, led by gains in East Anglia, with average prices up 10.1% year-on-year.
However, price growth in London was lower than the UK average for the time since 2008, with prices increasing by 3.7% over the year - down from 12.2% in 2015.
Southern England saw slightly stronger price growth than the North of England - the weakest performing region - though the differential narrowed.
Meanwhile, price growth in Wales, Scotland and Northern Ireland remained rather subdued, Nationwide said, although each nation saw small gains overall, at 2.4%, 2.2% and 0.7% respectively.
Robert Gardner, Nationwide’s chief economist, said: “Looking ahead to 2017, house price prospects will depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual.
“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth.
“But we continue to think a small gain - around two percent - is more likely than a decline over 2017 as a whole, since low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support for house prices.”
Howard Archer, chief UK and European economist at IHS Markit, is among those that believe the “fundamentals” for house buyers will progressively deteriorate during 2017 with consumers’ purchasing power weakening markedly and the labour market likely softening.
He said: “Increasing economic uncertainty is also likely to weigh down on consumer confidence and willingness to engage in major transactions such as buying a house. Housing market activity and prices are also likely to be pressurized by stretched house prices to earnings ratios and tight checking of prospective mortgage borrowers by lenders.”
Rob Weaver, director of investments at property crowdfunding platform Property Partner, commented: “The proverbial kitchen sink has been thrown at the housing market during 2016 - namely Brexit uncertainty and multiple tax changes - but prices are still creeping up.
“Admittedly, there’s been an easing off in the rate of property price growth but what seems clear is that the market has remained resilient and is stable, particularly when compared to other investments.
“The combination of record low borrowing rates propping up demand and a severe shortage of both housing stock and available homes for sale has meant prices have continued to rise.
“Predictions for the year ahead are positive although we most probably won’t be seeing London house prices over the short-term racing in front with dizzying double digit rises.
“The capital has been the engine powering UK house price growth, however, we’re seeing a softening in the centre although pockets of potential growth, particularly in outer boroughs and along the Crossrail route, should be of interest for investors.
“As the London market is expected to be slower in 2017, established markets such as Clapham, Balham and Wandsworth should remain solid. They’re good transitional areas for people moving out of the capital for more space to Surrey and especially Guildford - a well-established wealth corridor.
“Southern England is still outperforming the north year-on-year although we have seen a slowdown in many areas apart from East Anglia, which has been the star performer in 2016.
“Overall, property prices are heading upwards slowly but surely despite uncertain times politically and economically. In the long-term, the UK housing market will continue to outperform most other investment classes.”