UK House Prices drop 1.4% month on month (drop of 0.7% seasonally adjusted)

The Nationwide Building Society has this morning published its UK House Price data for October 2010. 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 £164,381 (compared with GBP £166,757 in September 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 11.6% off the peak of GBP £186,044 in October 2007. Interestingly the average house price at the end of September 2010 being GBP £164,381 (or €188,003  at GBP 1 = EUR 1.1437) is only 5.4% below the €198,689 which the Permanent TSB/ESRI said was the average nationally here at the end of September 2010.

With the latest release from Nationwide, UK house prices have risen by 0.99% 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 has declined to 911 meaning that average prices of NAMA property must increase by 9.8% for NAMA to breakeven on a gross basis.

Recent forecasts for the UK housing market have not tended to be good. Whilst Capital Economics has produced yet another headline-grabbing prediction of a 25% decline in the next 2-3 years, most commentators are suggesting an easing of prices. The EU bank stress tests published at the end of July 2010 suggested a base case of no change in UK residential prices in 2010 which would mean an 1.41% fall in prices between now and the end of the year. The UK economy is showing surprising resilience – figures released earlier this week showed GDP grew by 0.8% in Q3 following a 1.2% spurt in Q2. Last week’s spending review proposed massive cuts to public sector employment and brought home the far-from-certain position of the UK economy. Supply of property for sale has been bolstered by the abolition of HIPS (akin to BER certs) in June 2010 and which had cost about £300 and the Royal Institution of Chartered Surveyors (RICS) has also suggested that more sellers are returning to the market but that there are fewer would-be buyers, suggesting declines are in prospect.

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