GB: Nationwide HPI

Wed Nov 01 01:00:00 CDT 2017

Consensus Actual Previous Revised
M/M % Chg 0.2 0.2 0.2 0.4
Y/Y % Chg 2.2 2.5 2.0 2.3

According to the Nationwide's new survey, UK house prices continued to strengthen in October. A 0.2 percent monthly increase in the lender's HPI was in line with market expectations but, with September's gain revised up to 0.4 percent, lifted annual house price inflation to a surprisingly high 2.5 percent, a 3-month peak.

October's advance was the fourth in the last five months. Over the last three of those, prices were up 0.8 percent, short of the 1.0 percent recorded in the September quarter but still above the rates posted during the April-July period. Annual inflation has been within a 2-4 percent range since March.

On Monday, the September M4 data included a slowdown in mortgage lending and a dip in applications but neither fall was enough to dent hopes for a soft landing for the housing market. Today's report would seem consistent with that view.

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.