Britain is one of only three housing markets in the developed world in which house prices are not likely to rise this year, one of the world’s biggest credit ratings agencies has claimed.
Fitch Ratings, which produces an annual outlook on the housing market for 22 countries, said that average house prices in the UK would be flat in 2018 because of stretched affordability, low income growth and financial services jobs being relocated to the rest of Europe. It expects small falls in house prices in London and the southeast.
The only markets that had a worse outlook for this year were Greece, where Fitch predicts that prices will fall by 2 per cent, and Norway, where prices are expected to drop as much as 5 per cent.
Conversely, it expected prices in the United States to return to their highest levels since 2007, rising by 4.6 per cent in 2018.
House price growth in Britain has fared better than many experts and economists expected in the immediate aftermath of the European Union referendum, because of a lack of properties to meet demand. Nevertheless, it has slowed considerably.
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Halifax, Britain’s biggest mortgage lender, said that prices had risen by 2.7 per cent over the year to the end of December, a significant slowdown compared with 2016, when prices finished the year with growth of 6.5 per cent. House prices in London are rising at the slowest pace of anywhere in UK except for the northeast of England, as buyers reach the ceiling of what they can afford.
The forecast from Fitch came as a monthly rental index from Homelet revealed that the southeast had recorded a fall in average rents in every month last year on an annualised basis. Average rents in the year to December fell by 1 per cent to £989, compared with a 1.7 per cent rise for the UK as a whole to £907.
Martin Totty, head of Homelet, which verifies tenants’ references, said: “Last year, it seems there was some cooling of demand, perhaps initiated by Brexit-type uncertainties and, more specifically, a fall in net migration into London and parts of the southeast.”