GB: Nationwide HPI


Thu Jan 04 01:00:00 CST 2018

Consensus Actual Previous
M/M % Chg 0.2 0.6 0.1
Y/Y % Chg 2.0 2.6 2.5

Highlights
House prices were stronger than expected in December. A 0.6 percent monthly gain in the Nationwide's HPI was the sharpest since June and the fourth increase in a row. Annual house price inflation was 2.6 percent, up a tick from November and the highest outturn since July but still well short of the 4.5 percent posted in December 2016. London saw the most significant slowdown with prices falling 0.5 percent on the year, their first decline in eight years.

The quarterly change in the HPI was 0.8 percent, also 0.1 percentage points firmer than last time and maintaining the broadly flat trend seen since the three months ended August. The year was characterised by the conflicting impact on prices of very tight supply, record low mortgage rates and a strong labour market on the one hand versus weakening consumer confidence and a household budget squeeze on the other. The same factors are likely to have a sizeable influence in 2018 and the Nationwide is forecasting a marginal increase in its HPI of just 1 percent. Inevitably, much will depend upon how Brexit developments pan out.

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.