Unlike our own Permanent TSB/ESRI which takes a full 30 days after the period end to issue its (quarterly) House Price Index, the UK seems to have better data collection and analysis systems for reporting on house prices. The Nationwide Building Society has today published its July report. That Nationwide Building Society report is one of the referenced sources of information set out in the NAMA Long Term Economic Value Regulation and is a source for the key market data information shown at the top of this page.
The latest report from the Nationwide shows that prices in the UK fell by 0.5% in the month of July, the first decline in prices in since December 2009. The Nationwide attributes the fall to an increase in supply (the abolition of HIPs in June – the UK’s rough equivalent of the BER and sellers being tempted back into the market by a strong recovery in prices which has been evident since the start of 2009) and a decrease in demand (tight credit conditions and swingeing cuts to the public service and uncertainty about the economic future). The average price of a property in the UK today is GBP 169,347 (EUR 203,165 at GBP 1 = EUR 1.1997).
As for NAMA and its Valuation Date of 30th November, 2009 today’s report means that UK residential prices are up 4.04% since last November. The Minister for Finance has recently said that one third of NAMA’s assets are in the UK, though the Minister didn’t provide a split between residential and commercial.
What are the prospects for the future of UK residential? The recent EU bank stress test benchmark scenario has residential increasing by 2% for the full year 2010 which would indicate a 3-4% fall from prices today. Some commentators point to some future buoyancy in the market, particularly the London market, as a result of the Olympics. Others have forecast falls of 20% from current levels. Last week the UK’s GDP growth for the second quarter was reported to be 1.1% which was seen as very positive. Although there are no suggestions of UK interest rate rises from the present 0.5% Bank of England rate, inflation is running at 3% which is above the BoE target. Interest rate rises might dent prices.
The Halifax is saying thaty house prices rose by 0.6% in July 2010 so it is by no means clear which way house prices are going in the UK. Probably they are beginning to level off but talk of another price crash seems very pessimistic and is unlikely to materialise.
I would say there are a range of opinions on UK house prices and Capital Economics have been very pessimistic (and wrong) in the past. Although the general trend for property prices is similar when comparing the Halifax and the Nationwide, the Nationwide had 6 months of rises from Jan to Jun before the Jul fall, the Halifax has had three months of falls before the Jul rise. The Nationwide index comes out before the Halifax’s which is why it is used in the “key market data” information at the top of this page – both indices are recognised as credible by the NAMA LEV regulation. Personally I have no view on the UK residential market though if I were to guess I would say it will flatten out somewhat until the global recovery and public sector cutbacks bed down.