UK market ‘treading water’ as outlooks stays uncertain

The average house price in October was £165,650, the building society said, which reflected a 0.8 per cent increase on prices a year ago.

Robert Gardner, Nationwide’s chief economist, said the data was encouraging but did not change the picture of a market that is “treading water”.

He said: “The outlook remains uncertain but, with the UK economic recovery expected to remain sluggish, house price growth is likely to remain soft in the period ahead, with prices moving sideways or drifting modestly lower over the next 12 months.”

Howard Archer, chief UK economist for IHS Global Insight, warned that the slight rise did not signal a return to growth in the medium term.

He said: “We suspect that squeezed purchasing power, a now markedly weakening labour market, tight fiscal policy and major concerns over the economic outlook will limit potential buyers and weigh down on house prices over the final months of 2011 and the first half of 2012.”

He added that he believed prices would fall by around 5 per cent from current levels by the middle of next year.

“On top of that, there still seem to be significant difficulties in getting a mortgage for many people, notably including the need to raise high deposits – particularly for first-time buyers.”

Nationwide added that its latest analysis indicates the housing market reflects the economic uncertainty, with areas where more people in managerial and professional occupations stay, more active than places dominated by manual and semi-skilled workers.

JANE BRADLEY