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House prices set to remain soft in 2012

Tuesday, 29 November 2011 9:13 AM

House prices are set to move sideways or drift gently lower in 2012, according to the Nationwide.

The building society made the prediction this morning as it released its housing market index showing that prices rose 0.4 per cent in a "surprisingly resilient" November. The annual rate of house price inflation increased to +1.6 per cent.

Nationwide chief economist Robert Gardner said demand remained "extremely subdued", with transactions and mortgage approvals both still well below pre-crisis levels and their long-term averages.

Unemployment had also accelerated with 200,000 jobs lost in the three months to the end of September and wages rose at less than half the rate of inflation.

Meanwhile the Nationwide's index of consumer confidence fell to an all-time low in October, below even the levels seen in the depths of the financial crisis at the end of 2008.

However, prices were being supported by new building that remained well below the rate of household formation and by ultra-low interest rates that had helped limit the number of forced sales and the level of unsold stock.

Robert Gardner said: "With the UK economic recovery expected to remain sluggish well into 2012, house price growth is likely to remain soft, with prices moving sideways or drifting modestly lower over the next 12 months."

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