UK residential property up 0.1% in November 2011 (0.4% on a seasonally adjusted basis)

The Nationwide Building Society has this morning published its UK House Price data for November 2011. The Nationwide tends to be the first of the two UK building societies (the other being the Halifax) to produce house price data each month, it is one of the information sources referenced by NAMA’s Long Term Economic Value Regulation and is the source for the UK Residential key market data at the top of this page.

The Nationwide says that the average price of a UK home is now GBP £165,798 (compared with GBP £165,650 in October 2011 and GBP £162,764 at the end of November 2009 – 30^th November, 2009 is the Valuation date chosen by NAMA by reference to which it values the Current Market Values of assets underpinning NAMA loans). Prices in the UK are now 10.9% off the peak of GBP £186,044 in October 2007. Interestingly the average house price at the end of November 2011 being GBP £165,798 (or €192,883 at GBP 1 = EUR 1.1669) is 13% above the €171,315 implied by applying the CSO October 2011 index to the PTSB/ESRI peak prices in Ireland. The average property in Northern Ireland in Q3, 2011 was worth €163,438.

With the latest release from Nationwide, UK house prices have risen by 1.9% since 30^th November, 2009, the date chosen by NAMA pursuant to the section 73 of the NAMA Act by reference to which Current Market Values of assets are valued. The NWL Index is now at 831 (because only an estimated 20% of NAMA property in the UK is residential and only 29% of NAMA’s property overall is in the UK, small changes in UK residential have a negligible impact on the index) meaning that average prices of NAMA property must increase by a weighted average of 20.4% for NAMA to breakeven on a gross basis.

The outlook for property in the UK remains uncertain, and has become more uncertain in the past month with the downgrading in economic outlook forecasts. Although the Chancellor of the Exchequer, Tipperary and Waterford man, George Osborne is scheduled to deliver his Autumn Statement just after midday today and the UK’s Office for Budget Responsibility will deliver their own economic and fiscal outlook for November 2011 just after the Chancellor’s statement, we really don’t need these statements to know that the UK economy has become less positive in outlook in the past month. In part that’s our fault or at least the fault of the wider EuroZone for not putting a lid on the EU debt and banking crisis, and that tampers down the UK growth outlook. But the UK itself has not been as engaged as some feel it should have been in dealing with its deficit which at 10% in 2011 is similar to so-called economic basketcase Ireland which is forecast to finish this year at 10.3%.

What we do know is that for 200 years, the UK has inflated itself out of recession and debt, and inflation is set to end 2011 at 4%+. The UK has engaged in a GBP 295bn Quantitative Easing programme to get more money into the economy since the financial crisis broke in 2007. That is 20% of the UK’s annual GDP of GBP 1.5tn. And it shows – inflation from October 2007 to October 2011 in the UK was 14.9%, in Ireland it was  just 0.8%. Of course the UK has an enviable unemployment rate of just 8.3%, nearly half our 14.4%.

So there’s unlikely to be any great spurt in house prices, though supply constraints in some areas, notably London, may act to stabilise prices. Elsewhere there is an ongoing debate about new planning regulations in the UK and the supply of housing over the medium term, but what seems likely is that economic growth will be subdued over the next two years at around 1% per annum. With current levels of unemployment, and the austerity needed to close the deficit and the prospect of 3%+ inflation for the next couple of years, you wouldn’t have thought the prospects for the residential property market as a whole to be great in the UK.

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