British house prices rose in annual terms by more than 1% for the first time in 12 months in December, but uncertainty about Brexit is likely to weigh on the market again in 2020, mortgage lender Nationwide said.

House prices increased by 1.4% compared with December 2018, Nationwide said, in line with the median forecast in a Reuters poll of economists.

In December alone, house prices rose by 0.1%, compared with a median forecast in the poll for no change.

Britain’s housing market, along with the rest of the economy, has slowed since the 2016 referendum decision by voters to leave the European Union (EU).

Last year’s average price rise was weaker than gains of about 5% at the time of the referendum, according to Nationwide’s index.

The lender said it expected house prices to remain broadly flat over the next 12 months.

“Looking ahead, economic developments will remain the key driver of housing market trends and house prices,” Robert Gardner, Nationwide’s chief economist, said.

“Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth.” Prime Minister Boris Johnson led his Conservative Party to a sweeping victory in an election in December that paved the way for Britain to leave the EU at the end of this month.

Johnson has said he will strike a new trade deal with the bloc before Dec. 31, when a no-change transition period is due to end. EU officials have said that timetable might be too tight to reach a comprehensive deal.

Nationwide said house prices in London fell the most in 2019, down by 1.8%, though they are only around 5% below the all-time highs recorded in early 2017. The West Midlands was the best performing English region, with prices up by 2.7%, followed by the North, where prices were up 2.6%.

 British businesses turned less gloomy last month about Brexit’s eventual impact even though they expected the uncertainty to persist for longer, according to a survey conducted either side of Prime Minister Boris Johnson’s election win.

While most businesses still think Brexit will hurt sales over the long run rather than increase them, the gap narrowed in December, the Bank of England’s monthly Decision Makers Panel showed on Thursday.

The proportion expecting an eventual sales boost from Brexit rose to 17% from 13% in November, the highest since May 2018, the BoE survey showed.

Those expecting an eventual hit to sales fell to 33% from 37%.

Investors are watching for signs that Johnson’s victory in the Dec. 12 election has lifted worries about Britain’s political stability, potentially providing a much-needed boost to the economy which slowed to a crawl in late 2019.

Still, the outlook in the short-term remains challenging.

The BoE survey showed 53% of businesses cited Brexit as one of their top sources of uncertainty, the lowest share in six months and down from 55% in November.

Separately on Thursday, a British Chambers of Commerce survey of businesses showed “protracted weakness” across the economy in the fourth quarter, while an IHS Markit/CIPS report confirmed the sharpest decline in factory output since 2012.

Johnson has said he will clinch a deal settling Britain’s future trade ties with the European Union before a deadline on Dec.31 2020, although trade experts are sceptical about the chances of a comprehensive agreement being struck by then.

Some 42% of companies who took part in the BoE survey did not expect Brexit uncertainty to be resolved until 2021 at the earliest, up from 34% in November.

The survey of 2,887 business executives was conducted between Dec. 6 and Dec. 20.

British factory output fell in December at the fastest rate since 2012 as a tepid global economy hurt demand and businesses further reduced stocks of goods they had built up in case of a no-deal Brexit, a survey showed on Thursday.

The output gauge in the IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 45.6 from 49.1 in November, its lowest since July 2012. Readings below 50 denote contraction.

The broader headline PMI, which combines gauges of output, employment and orders, fell to 47.5 from 48.9 - revised up only slightly from a preliminary reading of 47.4 and marking a four-month low.

Reuters