 Print this page |
Property market 'constrained' by recession
|
Six months of house-price rises mean annual growth in the property market is positive for the first time since March '08. But can the trend continue in the face of Britain's longest ever recession?
UK house prices grew at 0.4% over the course of October, bringing the price of an average British house to £162,038, a gain of £222 on September's price.
Following on from stronger rises in the summer - 0.9% in September and 1.4% in both July and August - October's increase put the UK average at 2.0% higher than October 2008, according to the Nationwide house price index, released this morning.
But prices remain 13.1% down on their peak, reached in October 2007 as the global financial crisis took hold, and the future may not be entirely rosy.
Nationwide's Chief Economist, Martin Gahbauer, said last week's news of the ongoing recession in the British economy could hamper growth in the property market.
cut home costs
"A deeper and longer recession implies higher levels of unemployment and a longer period of subdued wages, both of which will act as constraints on the housing market’s recovery," he said.
"Given the poor labour market situation implied by the economy’s ongoing weakness, it is difficult to imagine the housing market returning to the buoyant levels of activity and price inflation that prevailed earlier in the decade."
Despite the poor economic outlook, confidence is beginning to return to the housing market, however.
Nationwide's consumer confidence survey has measured a shift in expectations of the housing market.
Mr Gabhauer said house price expectations can be an "important short-term driver of house prices and market activity": rising price expectations provide an incentive for potential buyers to bring forward their purchases.
"Over the course of 2009, consumer expectations of house price inflation have steadily risen and are now consistent with stable to slightly positive house price inflation in the near term," he said.
