GB: Nationwide HPI

September 30, 2016 01:00 CDT

Consensus Actual Previous
M/M % Chg 0.3 0.3 0.6
Y/Y % Chg 5.3 5.3 5.6

The housing market shows further signs of gentle cooling in September in the new Nationwide survey. The lender's measure of house prices rose 0.3 percent on the month after an unrevised 0.6 percent increase in August to yield annual growth of 5.3 percent, down from 5.6 percent last time. Even so, this was in line with market expectations and left the yearly change towards the upper end of the 3-6 percent range seen since early 2015.

In fact, September's gain nudged the HPI's quarterly rise 0.3 percentage points firmer to 1.3 percent, equalling its highest mark since the February-April period. The signs are that slowing demand for housing has been broadly met on the supply side, although the number of homes available for sale remains close to record lows.

With mortgage rates also at all-time lows and so no hindrance to demand, the outlook for prices will be heavily influenced by consumer confidence. A subdued level of new buyer enquiries suggests that Brexit worries are having some impact on market activity but, on the Nationwide's measure, prices have not fallen since June 2015 (and then only 0.1 percent on the month). For now, house prices look likely to remain on a shallow uptrend although, of course, Brexit developments could yet have a much larger say in things.

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.

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.