House price growth in the U.K. is expected to come to a halt in 2018, as higher interest rates and political and economic uncertainty combine with stretched affordability to restrain demand, but a dearth of supply should prevent outright declines, the Royal Institution of Chartered Surveyors said Dec. 20.
In its annual housing market forecast, RICS said that by the end of 2018, prices across the U.K. will likely see "almost no change" compared with a year earlier. Growth in some regions will likely be offset by price declines in others, particularly in London and the South East, it said.
In terms of sales, RICS expects transactions to total about 1.15 million in 2018, an approximate decline of 5% relative to 2017.
"One key element is clearly the ... lack of stock, presenting potential buyers with very limited choice. If this then prevents would-be home movers putting their own property on the market, it further exacerbates the issue," the report said.
While the Bank of England raised rates for the first time in a decade in November, and political and economic uncertainty is having an effect on demand, the biggest factor stifling activity is probably affordability, with median house prices across England now at a record 8x average earnings, RICS said.
Many of the measures announced in the U.K. government's autumn budget, including those aimed at boosting house building to 300,000 homes a year, will have little bearing next year as they are not due to come into effect until 2019-2020, the report said.