House price growth looks set to grind to a halt next year as uncertainty, a lack of available homes and stretched budgets weigh on the market, according to surveyors.
Figures from the Royal Institution of Chartered Surveyors (RICS) suggested that London would see a continuing trend of decline, spreading to the South East.
However the RICS survey found that this would be balanced with growth in most other parts of the UK such as Northern Ireland, Scotland, Wales and northwest England, areas where prices have yet to recover to pre-financial crisis levels.
The figures suggested that the annual rate of house price inflation, which it put at currently at just over 5%, would fall further through the first half of next year.
RICS economist Tarrant Parsons said: “Following a pretty lacklustre finish to 2017, the indications are that momentum across the housing market will be lacking as 2018 gets under way.
“A real lack of stock coming onto the market remains one of the biggest challenges, while affordability constraints are increasingly curbing demand in some parts.
“Given these dynamics, price growth may fade to produce a virtually flat outturn for 2018.”
The report said sales activity looked likely to be hindered by “lack of stock, stretched affordability, tax changes and interest rate rises”.
RICS said changes in stamp duty – scrapping the tax for first-time-buyer purchases below £300,000 – may slightly improve affordability for this group of home buyers.
But this looked likely to be offset by higher prices on these properties, therefore having minimal impact in lifting home ownership and being unlikely to stimulate housing activity to much extent.
However, Mr Parsons said that despite the recent interest rate hike, mortgage rates were set to remain low with further hikes unlikely.
Together with Government schemes such as Help To Buy this should provide continued support to the market, he added.
The figures come a day after lender Halifax said it expected house price growth to remain low, in the range of 0% to 3% by the end of 2018.
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It pointed to the continuing effects of this year’s squeeze on spending power with inflation running ahead of wage growth.
Halifax said year-on-year house price growth had slipped from 10% in March 2016 to as low as 2% in July this year before recovering to about 4% in recent months.