House prices edged up in November following a fall in the previous month, in new figures released by the Nationwide Building Society.
Annual house price inflation stood at 1.9%, up from the previous month’s figure of 1.6% that had marked a fall in growth. The Nationwide’s month-on-month change was at 0.3%, whereas the October data had shown no growth whatsoever.
The Brexit effect
Describing the picture as ‘subdued’, the Nationwide’s Chief Economist Robert Gardner pointed to the effect that Brexit is having on the overall property scene despite some promising economic factors.
“Much will depend on how broader economic conditions evolve,” said Mr Gardner.
“In the near term, the squeeze on household budgets and the uncertain economic outlook is likely to continue to dampen demand, even though borrowing costs remain low and the unemployment rate is near 40-year lows.
“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.”
‘Change of use’ helps boost supply
There are also indications of an improvement in the amount of housing stock being supplied. There were 195,300 new build completions in 2017/18, but the Nationwide has also found that when factoring in larger homes converted into more units, and when shops or offices are changed into dwellings, the amount of net additions is just 0.6% below those before the financial crash of a decade ago.
The conversion of empty shops, offices or the spaces above them could increase due to councils being allocated more money to carry this out in the recent Budget.
“The ‘change of use’ of buildings – i.e. from shops, offices and other commercial purposes, to homes – has provided a significant boost to supply in recent years,” Mr Gardner adds. “The change in government policy in 2014 to grant automatic permitted development rights to convert offices into residential properties has been a major factor, accounting for around half of dwellings created via change of use since its introduction.
“While 2017/18 saw a slowing in ‘change of use’ compared with the previous year, it still accounted for c30,000 dwellings, around 70% above 2007/08 level.”
Howard Archer, chief economist at EY Item Club, sounded a note of caution, saying, “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.
“Additionally, housing market activity remains hampered by relatively fragile consumer confidence and a limited willingness to engage in major transactions.”