November was a month of mixed blessings for homeowners looking to sell their properties, with the average house price rising in terms of inflation, but falling in cash terms.
That’s according to Nationwide’s figures which show the average house price rose by 0.3%, representing a change in fortunes from October which, at 1.6%, had been a five year low in house prices. This growth takes the average house price in the UK to £214,044.
In reality, though, the actual cash price of a house fell by around £500, a fall from £214,534 compared to the previous month.
However, the way that the figures are calculated by Nationwide, which allow for seasonal adjustments, means that their index still considered there to have been a rise.
Nationwide’s chief economist, Robert Gardner, said: “If the uncertainty lifts in the months ahead and employment continues to rise, there is scope for activity to pick up through next year.
“The squeeze on household incomes is already moderating and policymakers have signalled that, if the economy performs as they expect, interest rates are only expected to rise at a modest pace and to a limited extent in the years ahead.” Good news for buyers and sellers alike.
The Impact Of Housing Supplies
One factor in the increase in house prices has been the increase in housing stock. After a 60% fall in housing building following the financial crisis, the market has largely recovered, currently sitting at 3% below 2007/8 levels.
In addition, there has been a trend for larger homes to be converted into multiple units, and for change of usage from commercial to domestic purposes, which takes the whole market to just 0.6% below the levels before the financial crisis.
In total, there has been an increase of 1.9 million homes, representing an increase of 8.5% relative to the housing stock in 2007.
It’s worth noting that, despite the increase in house prices, Mr Gardner cautioned that: “Looking forward, much will depend on how broader economic conditions evolve”, referring to the impact that Brexit may have on the housing market.
This view is backed up by the EY ITEM Club’s chief economic advisor, Howard Archer, who said that the housing market is likely to remain largely stagnant in the coming months, particularly around London and the South East, which showed the largest drop in house prices in October 2018.
He stated that if the UK leaves the EU without a Brexit deal, prices ‘may well fall modestly’ in 2019.
“The fundamentals for house buyers are likely to remain challenging: consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing.”
The Bank of England takes a rather more sober view of the situation, warning that house prices could fall by as much as 30% in the event of a no-deal Brexit, a warning that is already having an impact on cautious potential buyers.
So while the situation is currently improving, there may well be stormy times ahead in the housing market.