During November there was a slight increase in yearly house price growth, but it is still a subdued market.

There were 1.9{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} higher prices compared to a year ago, which is up from October’s 1.6{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} five-year low, according to the building society.

Robert Gardner, the chief economist for Nationwide, says that looking forward, a lot will depend on how the broader economic conditions continue to evolve.

Over the near term, the uncertain economic outlook and squeeze on household budgets most likely will continue putting a damper on demand, despite continuing low borrowing costs and an unemployment rate that is near its 40-year low. If employment continues to increase and uncertainty is lifted in future months, there is room for activity to pick up the pace throughout next year. There has already been a moderation starting to occur when it comes to the squeeze on household incomes and it has been signalled by policymakers that, if the economy does perform as expected, that interest rates will only increase to a limited extent and at a moderate pace in the coming years. There has also been an improvement in the housing supply picture after it fell by nearly 60{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} during the financial crisis, and in recent years there has been a significant increase in construction noted by companies like Four Walls Group.

Improvement when additional dwellings are added

In 2017-2018 in England, new build completions reach 195,300, which was about 3{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} under 2007-2009 levels. Also, there is an even further improvement in the picture when additional dwellings are added in that were created through converting larger houses into additional units and ones created through ‘change of use’ – like former offices being turned into flats. On the broader measure, in fact, net housing stock additions are now only 0.6{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} under 2007 levels. These ‘change of use’ buildings – going from offices, shops and other commercial purposes, and turning them into homes – in recent years has provided a big boost in supply.

Government policy changes in 2014 for granting permitted development rights automatically for converting offices into residential properties is a major factor and accounts for about half of all dwellings that have been created out of the change of use since it was introduced. Although ‘change of use’ slowed down in 2017-18 compared to the prior year, it accounted for 30,000 dwellings still, or about 70{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} over 2007-08 levels. In certain areas, like Bristol and Nottingham, ‘change of use’ has accounted for about half of the homes that have been added over the last three years.

Where is the boost in supply occurring?

Over the past 10 years, England’s total housing stock has increased by 1.9 million dwellings, which represents an 8.5{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} increase over the 2007 stock.

The strongest growth has occurred in East England, London, and the South West, which are among the areas where relatively strong housing price growth has been seen during this time period, which suggests that supply responds to price signals. In the meantime, in regions like the North West and North East, where housing prices are still close to 2007 levels, there has been more modest growth in supply. When the most recent data is focussed on, the South West saw the strongest growth in 2017-18 as well, with about an additional 26,800 net dwellings, which was 1.1{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} of stock at the beginning of the time period. It was also relatively strong in the East Midlands, boosted up new builds picking up, with 21,400 dwellings being added (1{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} of total stock).

London, in contrast to a majority of regions, saw a slow down in net additions to its stock in 2017-18, with its dwellings showing a net increase that was about 20{2a48c6f5afe4bae343fbd5e875f658615ea7cbb525a928f8d0e004b64246b36e} lower compared to the previous year. That was due to new building completions decreasing and fewer ‘change of use’ additions as well. That likely is in response to changing market conditions within the capital, where in recent quarters modest price falls have been recorded and demand has continued to be relatively subdued.