GB: Nationwide HPI

Thu Apr 28 01:00:00 CDT 2016

Consensus Actual Previous Revised
M/M % Chg 0.5 0.2 0.8 0.7
Y/Y % Chg 4.9 5.7

Following a slightly smaller revised 0.7 percent monthly increase in March, house prices continued to rise in April but by rather less than generally expected. A 0.2 percent gain in the Nationwide's HPI equalled the smallest since prices last fell in back in June 2015 and reduced annual house price inflation from 5.7 percent to 4.9 percent, just 0.1 percentage points above its February outturn.

The March/April figures were almost certainly impacted by the increase in stamp duty on second homes introduced from the start of this month. This led to a record number of transactions at the end of last quarter, probably offset (the data are not yet available) by a reversal in April. However, over the last three months, prices were up 1.4 percent, unchanged from the first quarter advance and in line with the rate seen in six of the last seven months. This suggests no change in underlying trends.

The stamp duty effects could also hit market activity in May and possibly even June but with mortgage rates still around record lows and supply close to all-time lows, prices should continue to trend higher over the rest of the year. The BoE MPC and FPC should not be unhappy with today's update.

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.