Annual house price growth edges up in May - Nationwide

www.nationwide.co.uk/hpi

May 2014 Embargoed until 0700 3 June 2014

Annual house price growth edges up in May • •

UK house prices increased by 0.7% in May and were 11.1% higher than May 2013 First time buyers increasingly important in driving the recovery, Help to Buy playing a supporting rather than a starring role

Headlines Monthly Index* Monthly Change* Annual Change Average Price

(not seasonally adjusted)

May-14 368.2 0.7% 11.1%

Apr-14 365.7 1.2% 10.9%

£186,512

£183,577

* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “House prices recorded their thirteenth successive monthly increase in May, rising by 0.7%. As a result, the annual pace of price growth edged up to 11.1% up from 10.9% the previous month. “There have been tentative signs that activity in the housing market may be starting to moderate, with mortgage approvals in April around 17% below January’s high. “It is too early to say whether nationally this is indicative of a cooling trend in the wider market. The slowdown may partly be the result of the introduction of Mortgage Market Review (MMR) measures, which may take a few months to bed down. The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer. “However, with mortgage rates close to all-time lows and labour market conditions continuing to improve, underlying demand for homes is likely to remain strong.

First time buyers driving the recovery, but Help to Buy unlikely to be the main factor “First time buyers are playing an increasingly important role in the housing market recovery. First time buyers accounted for 48% of house purchase activity in March, a record high well above the long run average of 38%. Data from DCLG suggests that the Help to Buy scheme is providing support to first time buyers, who accounted for over 80% of Help to Buy loans to date. “However, the modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market. For example, 12,853 Help to Buy mortgages were completed in Q1 (6,327 under the mortgage guarantee scheme and 6,526 under the shared equity scheme), equivalent to around 9% of total mortgage completions over the period. “Low mortgage rates and growing buyer confidence on the back of improving labour market conditions and the brighter economic outlook are probably playing a much greater role in stimulating buyer demand.

Help to Buy playing less of a role in London “Help to Buy appears to be playing less of a role in areas which have seen the strongest recovery in house prices (see chart on next page). For example, London has recorded the fastest pace of house growth in recent quarters, with prices rising at an annual pace of 18% in Q1, almost twice the pace recorded in the UK as a whole. “However, we estimate that Help to Buy accounted for around 4% of mortgage completions in London in Q1, the lowest proportion amongst the UK regions. Indeed, Help to Buy has accounted for a larger share of transactions in regions such as the North of England where house price growth has been less marked.

Media enquiries to: Robert Gardner, Chief Economist, [email protected] Mike Pitcher, 01793 657225, [email protected]

Monthly UK House Price Statistics

“Moreover, the evidence suggests that higher priced areas have been seeing the largest percentage increases in house prices, especially in London and the South East (see chart below), but the majority of Help to Buy loans have been on transactions where the property values are below the national average. For example, 45% of Help to Buy mortgage guarantee loans were for property costing £125,000 or less, while only 22% of all mortgage house purchase transactions were on property values below this threshold.”

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14

Monthly % Change Seasonally Adjusted -0.5 0.4 0.1 -0.2 0.5 0.2 0.3 -0.1 0.5 0.4 1.1 0.8 1.0 1.1 0.8 1.5 0.9 0.7 0.5 1.2 0.7

3 Month on 3 Month % Change -0.4 0.3 0.4 0.5 0.2 0.4 0.6 0.6 0.7 0.6 1.2 1.7 2.4 2.7 2.9 3.1 3.1 3.2 2.8 2.5 2.3

Annual % Change

Average Price

-1.4 -0.9 -1.2 -1.0 0.0 0.0 0.8 0.9 1.1 1.9 3.9 3.5 5.0 5.8 6.5 8.4 8.8 9.4 9.5 10.9 11.1

163,964 164,153 163,853 162,262 162,245 162,638 164,630 165,586 167,912 168,941 170,825 170,514 172,127 173,678 174,566 175,826 176,491 177,846 180,264 183,577 186,512

Note: Historical figures including index levels can be viewed using the following link: www.nationwide.co.uk/hpi/datadownload


Notes Indices and average prices are produced using Nationwide's updated mix adjusted House Price Methodology, which was introduced with effect from the first quarter of 1995. The data is drawn from Nationwide’s house purchase mortgage lending at the post survey approvals stage. Price indices are seasonally adjusted using the US Bureau of the Census X12 method. Currently the calculations are based on a monthly data series starting from January 1991. Figures are recalculated each month which may result in revisions to historical data. The Nationwide Monthly House Price Index is prepared from information which we believe is collated with care, but no representation is made as to its accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the whole or any part of the Index at any time, for regulatory or other reasons. Persons seeking to place reliance on the Index for their own or third party commercial purposes do so entirely at their own risk. All changes are nominal and do not allow for inflation. More information on the house price index methodology along with time series data and archives of housing research can be found at www.nationwide.co.uk/hpi
