GB: Nationwide HPI

July 28, 2016 01:00 CDT

Consensus Actual Previous
M/M % Chg -0.2 0.5 0.2
Y/Y % Chg 5.2 5.1

House prices were surprisingly resilient in July. According to the new Nationwide survey prices climbed 0.5 percent on the month, their sharpest gain since March, for an annual inflation rate of 5.2 percent, up a tick from June. This was the first increase in the yearly rate in four months.

Prices in the three months to July, normally seen as the best gauge of the underlying trend, were 1.0 percent firmer, the smallest rise since last September but just 0.1 percentage points less than the June print. So, taken at face value, today's report would seem to indicate that Brexit has had little impact on the UK housing market. However, the Nationwide collects the data at the mortgage offer stage and there is a delay between a purchases making a decision to buy a property and applying for a mortgage. This means that the full impact of Brexit may not be apparent in the July figures.

Other anecdotal evidence has suggested that housing activity has cooled, possible significantly. In particular, buyer enquiries have fallen sharply. Even so, key market fundamentals remain supportive, notably the buoyancy of the labour market and the shortage of supply on estate agents' books. All in all, the outlook is highly uncertain and a clear picture of Brexit effects may not emerge for some time.

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.