|M/M % Chg||0.4||0.4||-0.2|
|Y/Y % Chg||3.5||3.5||3.3|
UK house prices rose 0.4 percent on the month in July according to the latest survey from the Nationwide. The increase, which followed an unrevised 0.2 percent fall in June, was in line with market expectations and nudged annual house price inflation a couple of ticks higher to 3.5 percent, its first gain since April.
July's figures put prices over the last three months 0.9 percent higher versus the previous period, down 0.2 percentage points from the June rate but matching the second highest level recorded so far in 2015.
The Nationwide sees still favourable demand conditions with reasonably robust employment growth, accelerating wages, buoyant consumer confidence and record low mortgage rates all factors boosting potential buying activity. Supply-side conditions also remain tight despite a pick-up in the number of new homes under construction.
In fact, if annual HPI growth really is settling down to around the 4 percent mark, in line with its historic norm, the BoE MPC would be more than happy with what would amount to a soft landing for the market. However, the Halifax data have shown a much stronger increase in its HPI in recent months (9.6 percent annual rate in June) so the jury is still out.
Note that as from today's report, the Nationwide HPI data are constructed using a slightly different methodology due to planned changes to the mortgage application process. However, all historic data remain valid and unchanged and the Nationwide will ensure that a continuous price series is maintained.
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.