"The result is a steady, more balanced market where prices are likely to be more sensitive in areas which overheated previously."
The latest report from Nationwide has revealed that there was a 0.2% month-on-month rise in average house prices during January - with annual house price growth remaining broadly stable at 4.3%.
Robert Gardner, Nationwide's Chief Economist, said: “The annual rate of house price growth remained broadly stable at the start of 2017 at 4.3%, only modestly below the growth rate in December of 4.5%. House prices increased by 0.2% over the month, after taking account of seasonal factors. The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly.
On the one hand, there are grounds for optimism. The economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11-year low in the three months to November.
However, there are tentative signs that conditions may be about to soften. Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed.
With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect.
On balance, we agree with the consensus view that the economy is likely to slow through 2017 as the squeeze on household budgets intensifies and heightened uncertainty weighs on business investment and hiring. Nevertheless, we continue to believe that a small rise in house prices of around 2% is more likely than a decline over the course of 2017, since low borrowing costs and the dearth of homes on the market will continue to support prices."
Jeremy Leaf, north London estate agent and a former RICS residential chairman, had this to say: "Although these figures are quite encouraging bearing in mind they reflect activity in the quieter period for the property market leading up to Christmas, they are also quite historic as they record what happened over the past two or three months.
What we found at the coalface during that time was a little bit more optimism in the market in terms of sentiment but sadly still not enough supply and not the quantity of buyers that we saw in the early to middle part of last year. The result is a steady, more balanced market where prices are likely to be more sensitive in areas which overheated previously."
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "Record low mortgage rates are largely responsible for much of the resilience we have seen in the housing market, with many borrowers taking advantage of some of the cheapest rates ever. We expect this to continue during the spring with lenders showing encouraging signs of wanting to do business by cutting rates further.
But not all lenders can compete at the sharp end of pricing so others are continuing to look at areas where there is demand and the risk/reward ratio is acceptable to them, which may mean a welcome tweaking of criteria instead."
Tarlochan Garcha, CEO, property peer-to-peer lending platform, Kuflink, comments: Some feared house prices would tumble post the Brexit vote but they have remained reassuringly resilient even as the March deadline set by the Prime Minister looms closer.
The near 30-year low in supply of available homes is underpinning the market with not enough residential properties being built.
And with interest rates at record lows and set to stay there, there’s still a seemingly strong appetite from buyers whether first-time or those hoping to move up the ladder.
Many would-be buyers who had been holding off until the referendum dust settled have given up trying to second guess the impact of the Brexit saga on their finances – and are instead focusing on the property market's solid foundations and taking the plunge. With discounts available for those who have the tenacity to negotiate, growing numbers of buyers are deciding that now is the time to act.”
Mario Berti, CEO of Octopus Property, said: “Following its extraordinary resilience in 2016, the property market has continued to stand firm at the beginning of 2017. The predicted unravelling of the property market in the aftermath of the EU Referendum vote last June simply hasn’t materialised.
Let's also not forget that the UK is a great place to be doing business. Growth in the UK exceeded that of the EU and the US in 2016 and the outlook is very positive. House prices may have nudged down very slightly on an annual basis but the UK property market remains stable.
Rising inflation could play havoc with household finances, which have the potential to impact confidence and in turn property values, but borrowing costs are still exceptionally competitive. Where interest rates are headed in response to rising inflation could be decisive for the outlook of the property market in 2017. If they do rise, it is likely that would trigger a shift in sentiment and start to put pressure on prices.
However, any downward pressure on prices is likely to be mitigated by continued tight supply of housing stock and demand from overseas buyers who are attracted by the current level of the pound."