Nationwide's Real House Price Index rises by only 0.1% in October
Posted on 30 October 2009 by
Nationwide’s “Real” House price Index increased by 0.1% in October, compared to the more widely reported 0.4% seasonally adjusted rise. This is the smallest monthly rise since the market bottomed out in February but nevertheless takes the run of unbroken monthly increases to 8. October marks a sharp slowdown in the rate of increase after the previous 5 months when prices rose between 0.9% and 1.6% every month.
The seasonally adjusted figures for November and December will total about 1% more than the real figures, with most of this adjustment taking place in December.
Although it is always dangerous to read too much into a single month’s figures the slowdown in the rate of increase shown by the October figures is healthy as monthly increases on the scale of those seen since March are clearly unsustainable. The Bank of England in particular will be pleased to see the rate of increase in house prices slowing because if prices were to continue rising at their recent pace the possibility of an earlier than expected increase in Bank Rate would have had to be considered and any such increase would be very harmful for the rest of the economy, which is likely to need support from low interest rates for a considerable time.
Although mortgage supply is still constrained conditions in the mortgage market have continued to improve over the last month, stimulated by some aggressive pricing from Northern Rock, which has pushed several other lenders to respond to protect their market share. This increased competition has even extended to the higher LTVs, with Nationwide in particular improving its proposition in this sector.
I don't expect the recent FSA proposals in the Mortgage Market Review (MMR) to have a significant impact on the market in the short term for two main reasons:
- The mortgage market has already tightened up considerably as a result of limited funding and so much of what the FSA is proposing is already a fact of life. The FSA is looking ahead to when more funding is available and lenders might become less restrictive.
- Some aspects of the FSA's proposals will almost certainly be amended because the MMR is a discussion document and there is no point the FSA consulting on it unless it is prepared to reassess its original proposals to take account of the views expressed. (I recognise that the Government sometimes completely ignores responses to a consultation process, such as with the introduction of HIPs, but the FSA has a much better record on taking account of responses to its consultations)
Nationwide's Chief Economist, Martin Gahbauer, points out that there is a strong correlation between consumers' future house price expectations, as measured by Nationwide's monthly Consumer Confidence Survey, and actual house price movements. The latest figures from this index have continued the recent trend showing more confidence returning to the housing market and twice as many people now expect house prices to rise over the next 6 months compared to those expecting a fall.
This supports my expectation that house prices on a national basis will continue to rise in the short term, but significant regional variations are likely to continue. After a surprisingly strong recovery this year the rate of increase is likely to continue at a slower pace but as long as a majority of people expect prices to rise there is a clear incentive for those people who want to buy to do so sooner rather than later, providing of course they can get adequate finance.
The following table shows the recent trends:
The Nationwide House Price Index – The Real Figures and the Seasonally Adjusted Ones | |||||
Month | Average price (£) | Real Change | Seasonally Adjusted Change | Difference | |
2008 | Jan | 180,473 | - 0.9% | - 0.6% | + 0.3% |
| Feb | 179,358 | - 0.6% | - 0.9% | - 0.3% |
| Mar | 179,110 | - 0.1% | - 1.2% | - 1.1% |
| Apr | 178,555 | - 0.3% | - 1.2% | - 0.9% |
| May | 173,583 | - 2.8% | - 3.0% | - 0.2% |
| Jun | 172,415 | - 0.7% | - 1.3% | - 0.6% |
| Jul | 169,316 | - 1.8% | - 2.0% | |
| Aug | 164,654 | - 2.8% | - 2.0% | + 0.8% |
| Sept | 161,797 | - 1.7% | - 1.8% | - 0.1% |
| Oct | 158,872 | - 1.8% | - 1.5% | + 0.3% |
| Nov | 158,442 | - 0.3% | unchanged | + 0.3% |
| Dec | 153,048 | - 3.4% | - 2.6% | + 0.8% |
2009 | Jan | 150,501 | - 1.7% | - 1.1% | + 0.6% |
| Feb | 147,746 | - 1.8% | - 1.7% | + 0.1% |
| Mar | 150,946 | + 2.2% | + 1.2% | - 1.0% |
| Apr | 151,861 | + 0.6% | - 0.3% | - 0.9% |
| May | 154,016 | + 1.4% | + 1.4% | nil |
| Jun | 156,442 | + 1.6% | + 1.0% | - 0.6% |
| Jul | 158,871 | + 1.6% | + 1.4% | - 0.2% |
| Aug | 160,224 | + 0.9% | + 1.4% | + 0.5% |
| Sept | 161,816 | + 1.0% | + 0.9% | - 0.1% |
| Oct | 162,038 | + 0.1% | + 0.4% | + 0.3% |
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Price Changes | ||
Over | Real Changes | Seasonally adjusted changes |
The last year | + 2.0% | |
2009 | + 5.9% | + 4.6% |
The last 6 months | + 6.7% | + 6.7% |
The last 3 months | + 2.0% | + 2.8% |
The last month | + 0.1% | + 0.4% |
Fall from peak | - 12.9% | - 13.2% |
Increase from 2009 trough | + 9.7% | + 7.7% |
Categories: Property market, Bank of England, Mortgages
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