British house prices rose fractionally by 0.4% in November, according to the latest data from Nationwide.
Chief Economist Robert Gardner said: “UK house prices increased by 0.4% in November, taking the annual rate of growth to 1.6%, up from 0.8% the previous month. 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.
But, 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 12 months.
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.
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.
Given the challenging economic backdrop, much of the current resilience in house prices reflects the lack of supply on the market at present. Indeed, the pace of building in recent years has fallen well below the pace of household formation.