GB: Nationwide HPI

Tue Aug 01 01:00:00 CDT 2017

Consensus Actual Previous
M/M % Chg -0.2 0.3 1.1
Y/Y % Chg 2.7 2.9 3.1

House prices were unexpectedly firm in July. According to the Nationwide's new survey, average prices rose 0.3 percent on the month following an unrevised 1.1 percent increase in June. This was the first back-to-back advance since January/February but not enough to prevent the annual inflation rate from dipping a couple of ticks further to 2.9 percent.

Over the last three months, the HPI was up 0.3 percent, its first positive print since April. The numbers are hardly buoyant but still somewhat surprising given weakening sales (8-month low) and declining mortgage approvals (9-month low). Rather, it looks as if the ongoing lack of supply - the number of properties available for sale is around record lows continues to provide fundamental support.

At least for now, the data remain in line with a soft landing for the housing market and the Nationwide still expects prices to rise about 2 percent over the calendar year. Such an outturn would sit well with the BoE.

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.