Happy New Year from all of us at Mantles. We hope it’s happy, healthy and financially secure !
The Times has surveyed 48 leading economists to give some predictions for 2017. Only time will tell how accurate they will be……
London house prices will stall next year as slowing growth and higher inflation eat into household incomes. After years of runaway growth that has seen the average price of a home in the capital soar from £294,000 before the crisis to £474,000, the majority of the respondents expect London prices to flatline or even contract in 2017.
Of the 39 economists who provided a prediction for London prices, 22 said they would end the year unchanged or lower.
The gloomy outlook was countered by a more positive view for the country as a whole, where prices are expected to continue to climb, albeit at a slower rate than the 6.9 per cent at which the Office for National Statistics said they ended the year.
Most economists expect prices to rise nationwide by more than 3 per cent, with a strong contingent forecasting 5 per cent growth. However, they still have a long way to go to catch up with the capital. Since 2008, the average house price for England has risen from £189,000 to £233,000.
Families will feel the effect of Brexit in their pockets as inflation is predicted to more than double from 1.2 per cent to almost 3 per cent next year, according to the survey. The consensus suggests that the Bank of England and the Office for Budget Responsibility (OBR) may be underestimating the effect of the cheap pound on prices. They are respectively predicting inflation to peak at 2.8 per cent and 2.5 per cent in 2018.
The Times survey found that 19 of the 46 economists who provided forecasts expect inflation to be at least 3 per cent next year and a majority (29) believe inflation will be above 2.5 per cent.
Despite the concerns about rising inflation, most economists expect interest rates to be held at 0.25 per cent or cut. Of the 48 responses, 32 economists said rates would not rise. In a show of support for Mark Carney, the Bank of England governor who has had a difficult few months since the referendum, the majority of economists said he was doing a good job.
GDP is expected to slow to about 1.4 per cent in 2017 from the OBR’s prediction of 2.1 per cent this year, with as many forecasts below the mark as above it.
The slowdown will not be the catastrophe initially forecast by many economists after Brexit, though. The consensus is for Britain to perform better than the International Monetary Fund’s 1.3 per cent growth for France and as well as the 1.6 per cent predicted for Germany.