GB: Nationwide HPI

Thu Mar 01 01:00:00 CST 2018

Consensus Actual Previous Revised
M/M % Chg 0.2 -0.3 0.6 0.8
Y/Y % Chg 2.6 2.2 3.2

February house prices saw their first monthly decline since last August according to the new Nationwide report. Following a stronger revised 0.8 percent bounce in January (the largest since June), prices surprisingly fell 0.3 percent to reduce annual house price inflation from 3.2 percent to 2.2 percent, also its weakest outturn since August.

However, the latest quarterly change, normally seen as the best guide to underlying trends, was 1.1 percent, a tick above the previous period's rate and its third increase in a row. The market has clearly cooled over the last year or so but still shows enough life to suggest that prices will make some progress during 2017. Supply remains as tight as ever and mortgage approvals look to have risen in January following a sharp decline in December.

Much will depend upon the future path of interest rates and Brexit. Borrowing costs look all but certain to increase further this year but monetary tightening is very unlikely to be aggressive. However, prospects for Brexit remain as uncertain as ever.

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.