GB: Nationwide HPI


Fri Sep 29 01:00:00 CDT 2017

Consensus Actual Previous
M/M % Chg 0.1 0.2 -0.1
Y/Y % Chg 1.9 2.0 2.1

Highlights
The Nationwide's index of UK house prices showed a much as expected 0.2 percent monthly rise in September. This more than reversed August's 0.1 percent dip and was the third increase since May. Even so, annual growth still edged a tick lower to 2.0 percent.

The quarterly change in the HPI was 0.9 percent. This compared with a 0.2 percent drop in the previous period and matched the first quarter outturn. Measures of housing activity such as mortgage approvals and lending have shown some improvement over the last few months so it may be that the market is over the worst of the slowdown. Significantly, and no doubt in part reflecting Brexit concerns, the only annual regional decline was in London (0.6 percent), its first decrease in eight years.

That said, much will depend upon how households react to an increasingly anticipated monetary tightening by the BoE. The share of outstanding mortgages on variable, as opposed to fixed, interest rates has fallen from a peak of around 70 percent in 2001 to about 40 percent currently. This leaves the market less vulnerable to any increase in Bank Rate. Nonetheless, the psychological damage could still be significant, especially for those households with high debt levels.

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.