Property prices in the United Kingdom (UK) are on a late-season rollercoaster and are expected to trend down in coming months, according to research by Nationwide. Residential real estate experienced a 0.4% rise in November, putting value up over last year, but a troubled UK economy and wider Eurozone concerns are expected to erase the small gains. Low consumer confidence is not helping the market, and some experts believe collaboration between the government and lenders may be required to boost demand as well as housing supply in the future. For more on this continue reading the following article from Property Wire.
UK residential property prices increased by 0.4% in November and are now 1.6% higher than a year ago, according to the latest figures published today (Tuesday 29 November) by the Nationwide.
The data comes as encouraging news after the previous month’s report also showed that prices rose, recording a 0.4% increase for October. The price of a typical home is now £165,798.
‘House prices have remained surprisingly resilient in recent months, despite the deterioration in the economic outlook,’ said Robert Gardner, Nationwide’s chief economist.
But there is no sudden recovery on the horizon. ‘With the UK economic recovery expected to remain sluggish well into 2012, house price growth is likely to remain soft, with prices moving sideways or drifting modestly lower over the next twelve months,’ he explained.
He pointed out that demand conditions remain extremely subdued in the UK housing market, with the number of housing transactions and mortgage approvals still well below their pre-crisis levels and their long term averages.
‘Moreover, many of the factors that underpin the demand for homes have deteriorated further in recent months. For example, the UK economy lost almost 200,000 jobs in the three months to September, similar to the pace of job losses seen during the depths of the 2008 recession. At the same time, wage growth slowed to 1.7%, less than half the pace of inflation over the same period,’ said Gardner.
‘Similarly, consumer confidence, which also influences the willingness to make a major purchase, remains extremely depressed. Nationwide’s index of consumer confidence fell to a new all time low in October,’ he added.
He believes it is important for the industry, government and lenders to come together to boost the sector. ‘Policy needs to strike a delicate balance, supporting demand and supply side of the market. The recently announced Mortgage Indemnity Scheme, which aims to boost first time buyer demand for new build properties by reducing the deposit requirement, offers the potential to boost housing demand from current subdued levels, especially if implemented against the backdrop of an improving economic environment,’ he explained.
‘However, it is important that policy efforts are effective in boosting housing supply, especially given current population trends. For example, government projections point to an average annual increase in household formation in England rising to around 240,000 a year over the 2013 to 2023 period,’ he said.
‘Current rates of building activity are below what would be necessary to meet housing demand, if these population projections prove accurate. For example, in the four quarters to quarter two 2011, 107,530 new dwellings were completed in England, less than half the volume required under this scenario.
‘Even returning to the rates of building seen in the ten years before the financial crisis, around 150,000 units a year, would still be below the required rate of construction. However, it is reassuring that steps are being taken to try to address this issue,’ he added.
This article was republished with permission from Property Wire.