GB: Nationwide HPI


Wed Nov 02 02:00:00 CDT 2016

Consensus Actual Previous
M/M % Chg 0.2 0.0 0.3
Y/Y % Chg 5.0 4.6 5.3

Highlights
House prices were steady in October according to the new survey from the Nationwide. This was the first time that the HPI has not shown a monthly rise since June last year and soft enough to reduce annual growth from 5.3 percent to 4.6 percent, its slowest reading since January.

Nationwide warned that recent price developments may still in part reflect the impact of the introduction of stamp duty on second homes in April as well as policy changes regarding the buy to let market. Even so, the signs are that there has been a cooing in underlying market trends too with less robust growth of demand competing with an ongoing shortage of supply.

That said, supply issues continue to provide a major source of support for prices and, despite a near halving in the rate of house inflation over the last two years, the current level is still more than double that of average earnings. To this end, any Brexit effects will probably have to be quite marked if prices are to enter a sustained period of contraction.

Definition
The Nationwide House Price Index (HPI) provides house price information 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.

Description
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.