House prices rise 0.5% in November

House prices remain static in November rising by just 0.5% - the same rate as in October - according to today's Nationwide House Price Index for November 2009.

The Lender also reports that year-on-year house price inflation has increased from 2.0% to 2.7%, and states that the Labour market has so far held up better than expected this year. Commenting on the figures Martin Gahbauer, Nationwide's Chief Economist, said:

“The monthly rate of house price inflation was unchanged in November at a seasonally adjusted 0.5%, leaving the average price of a typical property 2.7% higher than a year earlier. At £162,764, the average house price is at a similar level to where it was in early 2006.  The 3 month on 3 month rate of change dropped to 2.8% from 3.5% in October and 3.8% in September. This suggests that house prices are now rising at a more moderate pace than in the spring and summer months, when they experienced a very strong bounce from the early 2009 lows.”

Gahbauer commented that one possible reason for the better-than-expected recovery in prices is that unemployment rates have been lower than many economists had expected at the start of the year.

“The outlook for the housing market remains crucially dependent on labour market conditions,” said Mr Gahbauer. “Recent developments have been somewhat more encouraging than might have been expected.  Together with the fact that mortgage rates have fallen sharply as a result of base rate cuts, this has meant that far fewer borrowers have fallen into arrears than would normally be the case in such a deep recession. As such, the downward pressure on house prices from distressed sales has so far been significantly lower than expected."

However, Mr Gahbauer cautioned against reading too much optimism into the latest positive trend because it was not clear that employers could sustain their strategy of hoarding labour by cutting hours and pay rather than headcount. Low productivity, he said, may force them to cut workers, with a knock-on effect on the ability of homeowners to keep up mortgage payments.

Second, the public sector has not yet experienced any significant job losses, but presumably will begin to do so when fiscal policy is tightened from next year onwards

“Despite continued uncertainties about the future, the better-than-expected performance of the labour market has probably contributed to the surprise rebound in house prices this year,” said Mr Gahbauer.

Posted at 08:15PM Dec 01, 2009 by Kelly Board in Mortgages & Housing Market  |  Comments[0]