UK House Prices increase 0.6% month on month in June 2011 (no change on seasonally adjusted basis)

The Nationwide Building Society has this morning published its UK House Price data for June 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 £168,205 (compared with GBP £167,208 in May 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 9.6% off the peak of GBP £186,044 in October 2007. Interestingly the average house price at the end of June 2011 being GBP £168,205 (or €183,005  at GBP 1 = EUR 1.1108) is 1.6% below the €185,993 implied by applying the CSO May 2011 index to the PTSB/ESRI peak Irish prices.

With the latest release from Nationwide, UK house prices have risen by 3.34% 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 885 (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) meaning that average prices of NAMA property must increase by a weighted average of 13.0% for NAMA to breakeven on a gross basis.

The short-term outlook for UKresidential remains bumpy. Interest rates may need to rise to contain inflation that is beginning to take hold –  4.4% in February 2011, 4% in March 2011, 4.5% in April 2011  and 4.5% in May 2011 – all on an annual basis. The UK target is 2% so the base rate which has been at 0.5% since February, 2009 may need be raised. The UK March 2011 Budget estimated growth in GDP of 1.7% and 2.5% in 2011 and 2012 and inflation of 4-5% this year falling to 2.5% in 2012.  Net debt will be 60% of GDP this year rising to 71% in 2012. Scary for the UK but paradise compared to the 100%+ in Ireland. The UK is also struggling with a deficit that was 11% last year (compared with 12% in basket-caseIreland) but there are swingeing cuts to public services in prospect to bring the deficit down to 4% by 2014/5. What all of this means for property prices is uncertain of course but the betting is that prices will come under modest pressure and may fall by less than 5% in 2011 – the Office for Budgetary Responsibility was saying 2.7% late last year but finances have deteriorated since then. TheUK has plenty of micro-markets and the betting would be thatLondon and the south-East will fare better than the North of England and elsewhere,Northern Ireland in particular.

This morning also sees the publication of the Q2, 2011 Nationwide’s quarterly series which provides a little more information on regional variations.