GB: Nationwide HPI

August 29, 2017 01:00 CDT

Consensus Actual Previous
M/M % Chg 0.1 -0.1 0.3
Y/Y % Chg 2.5 2.1 2.9

According to the Nationwide's new survey, UK house prices were little changed in August. The lender's HPI was down just 0.1 percent on the month, its first drop since May. The weaker than expected outturn reduced annual house price inflation from 2.9 percent to 2.1 percent, matching May's recent low.

The 3-monthly change in the HPI actually climbed from 0.3 percent to 1.0 percent, equalling its strongest mark since the three months ending February. However, this was wholly attributable to a strong June when prices rose a monthly 1.1 percent and this effect will fall out of the quarterly rate in September.

Overall, the Nationwide's results are consistent with a further modest cooling in housing activity and a more general loss of momentum in the economy as a whole. Favourable supply-side factors still look to be capable of preventing a major outright fall in house prices but the sluggishness of the market is a threat to prospective consumer spending.

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.