|M/M % Chg||0.3||0.3||0.2|
|Y/Y % Chg||6.6||6.8||7.2|
Average house prices rose 0.3 percent on the month in January according to the new Nationwide survey. The increase, which matched market expectations, reduced the yearly gain from 7.2 percent in December to 6.8 percent, extending the slowdown that began in September and leaving the weakest annual rate since November 2013.
Over the last three months prices advanced 0.9 percent, a tick down on the fourth quarter outturn and less than a third of the pace recorded during their peak period of late 2013/early 2014. The ongoing moderation is consistent with slowing demand as reflected in a steady fall in mortgage approvals (17-month low in November) and a continued subdued level of buyer enquiries.
However, near record low mortgage rates have helped to keep loan service costs close to their long-run average and supply side developments remain positive with surveyors reporting a lack of new properties coming onto the market. Against this backdrop annual house price inflation should receive some support over coming months. The real test will come when the BoE MPC finally raises Bank Rate but such an eventuality would still seem a long way off yet.
House price information is derived from Nationwide lending data for properties at the post survey approval stage. Nationwide house prices are mix adjusted that is they track a representative house price over time rather than the simple average price.
Home values affect much in the economy especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.
Although the Nationwide data are calculated similar to the Halifax method Nationwide substantially updated their system in 1993 following the publication of the 1991 census data. These improvements mean that Nationwide's system is more robust to lower sample sizes because it better identifies and tracks representative house prices. Historically, the data go back to 1952 on a quarterly basis and 1991 on a monthly basis.
Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns. This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices. Nationwide's average price differs because the representative property tracked is different in make up to that of Halifax.
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