GB: Nationwide HPI

Wed Sep 30 01:00:00 CDT 2015

Consensus Actual Previous Revised
M/M % Chg 0.4 0.5 0.3 0.4
Y/Y % Chg 3.8 3.8 3.2

House prices performed broadly in line with expectations in September according to the new survey from the Nationwide. A 0.5 percent monthly increase in the lender's HPI followed a marginally firmer revised 0.4 percent gain in August to lift annual HPI growth from 3.2 percent to 3.8 percent.

For the third quarter as a whole, the best measure of the underlying trend, prices were up 0.8 percent, a tick above the June-August rate and the first increase in this measure since June. The Nationwide suggested that HPI inflation may be stabilising around the 4 percent mark and so close to long-run average earnings growth but warned that a shortage of new properties available for sale and increased new buyer enquiries made for upside risk.

Indeed, the recent pick-up in housing activity has not gone unnoticed by the BoE and house prices are certainly back on the central bank's radar. Worries about a new bubble triggering a price crash had eased in line with increasing signs of a soft landing since the middle of 2014. However, renewed demand, encouraged in no small way by record low mortgage rates, and very tight supply have prompted fresh concerns. Just last week the BoE's Financial Policy Committee (FPC) issued a warning that a surge in buy-to-let mortgages could end up amplifying any future downturn in prices. Today's update from the Nationwide will only exacerbate such concerns.

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.