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Home arrow News arrow Europe arrow UK house prices unchanged compared with a year ago, says latest Nationwide index

UK house prices unchanged compared with a year ago, says latest Nationwide index

Tuesday, 05 March 2013
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The price of a typical home in the UK is unchanged from a year ago, with values rising just 0.2% last month, according to the latest house price index from the Nationwide.

The average house price is now £162,638 and annual house price growth has been flat for two months in a row.

But there are positive signs as well, said Nationwide chief economist Robert Gardner. ‘While activity in the housing market remains subdued by historic standards, there have been tentative signs of a pick up in recent months. The Funding for Lending Scheme has achieved some success in bringing down mortgage rates, with encouraging signs of an improvement in credit availability,’ he explained.

‘While the economic backdrop remains challenging, there are reasons for cautious optimism that activity will gather momentum in the months ahead. In particular, employment is rising at the fastest pace since the late 1990s which, if maintained, should help support demand for homes,’ he pointed out.

However, progress is likely to be gradual. ‘Stubbornly high inflation will continue to exert pressure on household budgets. Moreover, buyer confidence is likely to remain fragile until there are signs that the wider economic recovery is firmly entrenched,’ he added.

In an analysis the Nationwide points out that after rising almost continuously over the course of the twentieth century, the rate of home ownership has been declining steadily since 2003.

Indeed, the rate has dropped by more than 5% in less than 10 years, from an all time high of 70.9% in 2003 to 65.3% in 2012.
This decline in home ownership is particularly marked in younger age groups. In particular, amongst 25 to 34 year olds, the category which traditionally contains most first time buyers, the proportion of households renting has increased from 40% to 57% between 2002 and 2012. For 16 to 24 year olds, the proportion renting has increased from 77% to 90% over the same period.

The increase in renting has boosted the private rental sector which currently houses 17% of total households, the highest share since the 1970s. At the same time the percentage of households in social renting properties is declining slightly, from 19% to 17% between 2002 and 2012.
 
The Nationwide says that the increase in the demand for rental property has put upward pressure on rents in recent years. In the decade before the financial crisis rental growth persistently lagged behind earnings growth, but this pattern has reversed.

Despite the increase in the proportion of the population renting a home in recent years, the aspiration to eventually become a home owner remains undiminished. The most recent English Housing Survey suggests that 20% of people in social housing and 59% of those in the private rental sector expect to be able to buy their own home in future.
 
However, the same survey found that, on average, people expect that this will take longer. Just 22% of private renters expect to take their first steps into the housing market within two years, down from 29% in 2008.


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