GB: Nationwide HPI

March 31, 2017 01:00 CDT

Consensus Actual Previous
M/M % Chg 0.3 -0.3 0.6
Y/Y % Chg 4.0 3.5 4.5

According to the new Nationwide survey, house prices fell 0.3 percent on the month in March. The weaker than expected outturn was the first decline in two years and reduced annual house price inflation from 4.5 percent to 3.5 percent, its lowest reading since August 2015.

Despite March's drop, the quarterly change in the HPI was still relatively firm at 1.0 percent, just a tick short of its previous posting and the second highest since the August-October 2016 period. Regional variations remain sizeable but there has been some convergence and, at 6.8 percentage points, the first quarter saw the gap between the strongest and weakest yearly rates at its narrowest since 1978.

Market fundamentals remain positive with mortgage rates still at or around record lows and supply as tight as ever. Nonetheless, the housing market has clearly cooled since last June's Brexit vote and uncertainty over what shape the final deal, if any, will look like will probably put a cap on price growth over the rest of the year.

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.