House price growth will slow next year, but the shortage of housing supply will continue to drive prices up, according to surveyors.
The Royal Institution of Chartered Surveyors said supply will to continue outstrip demand in 2017, pushing up house prices by an average of 3%.
RICS said the number of homes sold next year would likely come in between 1.15 and 1.2 million, reflecting the trend over recent months.
“While there is an improvement, the legacy of building on an insufficient scale has left the average inventory on estate agents books close to a historic low,” RICS said.
RICS members have reported a fall in the number of new homes coming on to the market for the past nine months in a row, whilst at the same buyers continue to register interest.
East Anglia is likely to record the highest national average increase, alongside the North West and West Midlands.
Prices in Central London look set to stabilise after recent declines, with support provided by the weaker exchange rate encouraging foreign buyers.
Rents are likely to increase by between 2% to 3% across the UK in 2017.
Simon Rubinsohn, RICS chief economist, said: “Although recent announcements by the government on housing are very welcome, the ongoing shortfall of stock across much of the sales and lettings markets is set to continue to underpin prices and rents.
“As a result, the affordability challenge will remain very much to the fore for many. Meanwhile the lack of existing inventory in the market is impacting the ability of households to move and will contribute toward transaction activity over the whole of 2017 being a little lower that in the year just ending.”
Nationwide said it expects house price growth to slow to 2% next year after remaining in a fairly narrow range of between 4% to 6% throughout 2016.
Robert Gardner, Nationwide’s chief economist, said house price prospects will depend largely on developments in the wider economy.
“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.
“We continue to think a small gain 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.”
