House prices in the UK will increase by 1% to 4% in 2017, according to Halifax. The average house price which currently stands at £218,000 ($267,917) would increase to between £220,000 and £226,000 in 2017.

The latest annual forecast by Britain's biggest mortgage lender marks a potential slowdown in the property market following many years of growth. It is also much lower when compared to the 6% gain that property prices saw in 2016.

Halifax said the slowdown would be amid a weakening of economic growth, potential rise in unemployment and an increase in inflation that would squeeze household income. The company said the forecast reflects the high degree of uncertainty in the UK economy, especially given the lack of clarity on how Brexit would change the UK's relationship with the European Union (EU).

"Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment...This deterioration in the labour market, together with an expected squeeze on households' spending power, is likely to curb housing demand," Martin Ellis, housing economist at Halifax, was quoted as saying by Bloomberg.

Halifax said the increase in prices could be restricted to certain locations. Certain parts in London could witness reduction in house prices. "House prices in relation to average earnings are at an historical high in the capital; at nine times annual average earnings. Additionally, mortgage affordability in London is worse than its long run average ... price growth will slow more sharply in London than elsewhere during 2017. There is a risk of some price falls in parts of London, particularly in the most expensive central locations, in 2017," Ellis was quoted as saying by the Guardian.

Halifax said it also expects the UK to see a fall in buy-to-let lending next year amid new tax increases that are expected to be implemented in April along with stricter underwriting standards.

"A tightening in underwriting criteria through higher interest cover ratios and stressed mortgage rates – already implemented by some lenders and likely to become more widespread as a result of possible regulation – are set to further limit demand in 2017...The BTL sector is therefore expected to cool further in 2017," Ellis said.

However, it is not all bad news and the property sector looks good in the long run. "The long-term case for investing in housing, however, remains strong with the sector set to continue to offer attractive rates of return compared to alternative investment classes despite these developments," Ellis said.