GB: Nationwide HPI

April 28, 2017 01:00 CDT

Consensus Actual Previous
M/M % Chg 0.1 -0.4 -0.3
Y/Y % Chg 3.3 2.6 3.5

According to the Nationwide's latest survey house prices fell 0.4 percent on the month in April, equalling their weakest performance since July 2012. This was their second fall in a row and will bolster the view that Brexit worries could have a significant impact on the housing market in 2017. The lender's HPI is now only 2.6 percent above its level a year ago, its slowest annual growth rate in nearly four years.

Prices were up 0.6 percent over the latest three months but this was down from a 0.9 percent first quarter rate and matched the lowest print since February-April 2015. The cooling is in line with other indicators of a deceleration in economic activity in general. Moreover, housing affordability is now close to an all-time low with the typical house price currently 6.1 times average earnings, well above the long run average of 4.3 times earnings, and close to the 6.4 record posted in 2007.

Supply-side fundamentals remain as positive as ever but on current trends it looks like house prices will do well to register positive growth this 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.