PwC says UK house prices set for steady growth

UK house price inflation was expected to slow further in 2017 but to remain steady thereafter, PriceWaterhouseCoopers's said in its annual UK Economic Outlook.

According to the auditors, increases in the average cost of owning a home in Britain were set to slow to 3.7%, down on the 7% seen in 2016, growing at an average pace of about 4% thereafter.

Prices in London were seen continuing to fare worst due to the uncertainty around Brexit.

During the first four months of the year, prices in the capital had risen by just 4.1%, versus a 13.2% increase over the comparable period of 2016.

Despite the more gradual pace of price increases, house prices in London had followed the typical pattern with momentum having shifted away from central London to the outer boroughs first followed by the commuter belt towns and cities outside London.

Over the past two years, house prices in the outer boroughs rose nine percentage points more quickly than in the inner boroughs.

In parallel, house price inflation in the fastest growing cities within the commuter belt had exceeded the average rate of increase in London by four percentage points in 2016.

And Westminister's proposed plans for homebuilding would do little to cap price increases, PwC said, given the backlog of under-supply which had built up after many decades.

Regarding the broader economy, PwC said the rate of expansion in gross domestic product was set to slow to 1.4% in 2017 followed by growth of 1.4% in 2018, with inflation running at 2.8% and 2.9% in each of those two years.

As for the Bank of England, the auditors saw Bank Rate on hold over the short-term but said the case for a hike might build later in 2017 or, more likely, in 2018 should growth and inflation evolve broadly as they expected.