"Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed."
House prices increased by 0.2% over the month, after taking account of seasonal factors.
Robert Gardner, Nationwide's Chief Economist, said: “The outlook for the housing market remains clouded, reflecting the uncertainty surrounding economic prospects more broadly.
“On the one hand, there are grounds for optimism. The economy has remained far stronger than expected in the wake of the Brexit vote. Recent data indicates that the economy didn’t slow in the second half of 2016 and the unemployment rate remained stable at an 11-year low in the three months to November.
“However, there are tentative signs that conditions may be about to soften. Employment growth has moderated, and while wage growth has edged up in recent months, in real terms (i.e. after adjusting for inflation), earnings growth has already slowed.
“With inflation set to rise further in the months ahead as a result of the weaker pound, real wages are likely to come under further pressure. Employment growth is also likely to continue to moderate, should the economy slow as most forecasters expect."
Gardner believes the economy is likely to slow through 2017 as the squeeze on household budgets intensifies, but says a small rise in house prices of around 2% is more likely than a decline over the course of 2017.
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "Record low mortgage rates are largely responsible for much of the resilience we have seen in the housing market, with many borrowers taking advantage of some of the cheapest rates ever. We expect this to continue during the spring with lenders showing encouraging signs of wanting to do business by cutting rates further."
Brian Murphy, Head of Lending at Mortgage Advice Bureau, added: “As we enter the Spring market, which traditionally is one of the busiest times of the year in terms of properties bought and sold, there are a number of factors at play which might act as a ‘counter balance’ on the UK housing market; on the one hand, we have continued consumer demand for property which is driven by record low mortgage rates and affordability. On the other side of the coin, we have the ongoing political and economic climate, which could perhaps suggest that households become more cautious with their finances over the next year.
"However, this mixed picture could actually be a positive, as it means that the likelihood of another ‘housing bubble’, fuelled by cheap borrowing and lack of stock, doesn’t appear to be on the cards for the foreseeable future. Instead what economists are predicting is a modest increase in house prices across the year, as the Nationwide suggests a 2% rise by the end of 2017, which is a far more healthy and stable outlook, rather than a UK housing market that gallops away from the reach of first time buyers and those moving up the ladder.
"Of course, it’s too early to tell what 2017 will bring in terms of property values, and we will have to wait a few months to see how buyers and sellers react given the current outlook. But given all the elements at play, one might suggest that the data at this stage is reassuring rather than giving cause for concern.”
