UK house price growth to remain low but protracted falls unlikely, HSBC says

UK home prices will grow very little in the short-term despite the recent sharp slowdown, but they will not fall in a sustained manner, at least outside of London, a top investment bank said.

HSBC economist Chris Hare forecast house price growth in Britain would slow to between 1% and 3% in 2017 and 2018, but the "anaemic" supply of homes meant a "protracted" period of deflation was unlikely at the national level.

In London on the other hand, unaffordability metrics were much more stretched "so a larger correction might be warranted", he said.

The big role played by foreign investment in London property also meant that Brexit-related uncertainty might have a larger impact in the capital.

Among the headwinds facing the sector Hare highlighted the fading impact from government policies such as Help-to-Buy and Buy-to-Let, the inhibiting effect high prices were having on many buyers, Brexit uncertainty and the squeeze on household incomes.

On a brigher note, Hare pointed out how housebuilding in fact grew 13% in 2016, despite the slowdown in home price inflation.

That would boost Britain's gross domestic product in the near term and the link between soft house prices and consumer spending was weak, he said.