Transactions remain subdued but property market activity could pick up next year when there is more certainty around Brexit.
The housing market remained subdued in November in the face of ongoing economic uncertainty.
The average cost of a UK home edged ahead by just 0.3% during the month to stand at £214,534.
Property values have only increased by 1.9% during the past 12 months, according to Nationwide Building Society.
Robert Gardner, Nationwide’s chief economist, said: “Looking forward, much will depend on how broader economic conditions evolve.”
But he added that if the current uncertainty clears and employment continues to rise, there was scope for housing market activity to pick up next year.
Why is this happening?
The economic uncertainty caused by the Brexit process has led to many potential buyers adopting a ‘wait and see’ approach.
Stretched affordability, as a result of a combinations of previous house price rises and weak growth in real incomes, is also acting as a brake on the market.
Despite these factors, the ongoing shortage of homes for sale is helping to support prices.
Who does it affect?
The current sluggish levels of activity in the housing market are bad news for those wanting to go ahead with a purchase, as the number of homes on the market remain close to record lows, meaning they have limited choice.
At the same time, those who want to sell a property are having to be more realistic about their asking price.
But activity levels are expected to pick up again once the outcome of Brexit becomes clearer.
What’s the background?
One factor that has been driving house price growth in recent years is that the construction of new homes has not kept pace with population growth.
Nationwide said that after falling by almost 60% in the wake of the global financial crisis, construction levels in England were now just 3% lower than they had been in 2007/2008.
Once homes that have been created through converting larger properties into smaller units or through a change of use are factored in, annual net additions to the housing stock are just 0.6% below 2007’s level.
Gardner said: “Over the last 10 years, the total housing stock in England has grown by 1.9 million dwellings, representing an 8.5% increase relative to stock in 2007.”
The biggest increases in homes have been in the south west, London and the east of England, which have all seen strong house price growth during the past 10 years.
By contrast, regions such as the north east and north west, where house prices have not recovered, have seen more modest rises in supply.
The Government has set the target of increasing the UK’s housing stock by 300,000 homes a year by the mid-2020s.
Top 3 takeaways
- The housing market remained subdued in November in the face of ongoing economic uncertainty
- The average cost of a UK home edged ahead by just 0.3% during the month to stand at £214,534
- Property values have only increased by 1.9% during the past 12 months