House price growth in the UK has picked up despite continued economic and political uncertainty, but remains far below the levels seen before the EU referendum.
The average price of a home rose by 0.5% in November to £215,734, according to Nationwide building society. This is the biggest monthly rise since July 2018, and up from 0.2% in October. The annual growth rate picked up to 0.8% from 0.4%, the highest since April.
However, annual house price growth remains below 1%, where it has been stuck for the past 12 months. This is below the rate of inflation, at 1.5%, and wage growth of around 4%. Before the June 2016 Brexit vote, house prices were rising at an annual rate of around 5%.
This means properties have become more affordable, but the heightened economic and political uncertainty created by Brexit and the global slowdown is putting potential house buyers off.
The labour market has also faltered recently, with pay growth slowing and employment falling by 58,000 in the three months to September, its biggest fall in four years.
Robert Gardner, Nationwide’s chief economist, said indicators of UK economic activity had been volatile, “but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensification of Brexit uncertainty. To date, the slowdown has largely centred on business investment, while household spending has been more resilient.”
He added that the general election on 12 December should not have a major impact on the housing market, judging by past experience.
“Past general elections do not appear to have generated volatility in house prices or resulted in a significant change in house price trends. On the whole, prevailing trends have been maintained just before, during and after UK general elections.
“Broader economic trends appear to dominate any immediate election-related impacts … Rightly or wrongly, for most home buyers, elections are not foremost in their minds while buying or selling their home.”
Howard Archer, chief economic advisor to the EY ITEM Club forecasting group, said house prices are likely to keep rising at an annual pace of around 1%. If the election delivers a decisive result and the UK leaves the EU with a deal by 31 January, uncertainty should ease and prices could rise by 2% in 2020.
However, should the UK ultimately crash out of the EU without a deal, house prices could quickly drop by 5%, Archer predicted.