House price growth edges up in August - Nationwide

www.nationwide.co.uk/hpi

August 2014

House price growth edges up in August  

UK house prices increased by 0.8% in August Annual house price growth up from 10.6% to 11%

Headlines Monthly Index* Monthly Change* Annual Change Average Price (not seasonally adjusted)

Aug-14 376.0 0.8% 11.0%

Jul-14 373.1 0.2% 10.6%

£189,306

£188,949

* 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: “UK house prices edged up by 0.8% in August, marking the sixteenth successive monthly price rise. As a result, the annual pace of house price growth is up to 11% from 10.6% in July. “While this is still below the 11.8% recorded in June, house price growth continues to outpace earnings by a wide margin, with average wage growth running at less than 1% in recent months. “Nevertheless, at a national level housing affordability does not appear stretched by historic standards, in part due to the low level of mortgage rates. The cost of servicing a typical mortgage remains close to the long run average as a share of take home pay (see chart).

“The outlook for the housing market remains highly uncertain. The number of mortgage approvals fell by almost 20% between January and May, suggesting that activity was cooling. However, there was a modest rebound in June and it is unclear how much of the slowdown was due to the introduction of Mortgage Market Review rather than an underlying loss of momentum. “Surveyors report that new buyer enquiries have moderated somewhat in recent months, and the prospect of interest rate increases together with subdued wage growth may temper demand in the quarters ahead. “However, the brightening economic outlook is likely to provide ongoing support for housing demand. Consumer sentiment remains buoyant thanks to declining inflation and sustained increases in employment. “Similarly, the first increase in interest rates still appears some way off - we expect the first increase in the first quarter of 2015. Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and they are expected to settle at a level somewhat below the average prevailing before the financial crisis. “Moreover, the supply side of the market remains constrained, which will continue to provide underlying support for prices.

Impact of good transport links on house prices clearly evident in major UK cities “There are a wide range of factors that determine property values, from the physical characteristics of the property itself, such as the number of bedrooms, bathrooms and floor area, to the type of neighbourhood in which the house is located. “We recently examined how the proximity to a tube or railway station impacted property prices in three major cities (London, Manchester and Glasgow) after taking account of other property characteristics, such as property type, size and local neighbourhood type. Our research suggests that people are willing to pay a significant premium to be close to a station.

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

“The impact is most marked in London, where being located 500m from a station attracts a 10.5% price premium over an otherwise identical property 1,500m from a station. This is equivalent to approximately £42,000 based on the value of the typical London home. In Manchester, the premium on a typical property for being 500m from station is 4.6% (£8,300), while in Glasgow the premium is 6% (£9,400).

“London homebuyers’ willingness to pay a greater premium for being close to a station compared with those in Greater Manchester and Glasgow probably reflects the greater reliance on public transport in the capital, with residents less likely to drive. “London also has the densest network of stations and services, with 94% of properties within 1.5km of a station, compared with 72% in Greater Glasgow and 69% in Greater Manchester.”

Monthly UK House Price Statistics

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 Jun-14 Jul-14 Aug-14

Monthly % Change Seasonally Adjusted -0.2 0.5 0.3 0.3 0.0 0.5 0.3 1.3 0.5 1.0 1.1 0.8 1.5 0.9 0.8 0.6 1.2 0.7 1.0 0.2 0.8

3 Month on 3 Month % Change 0.5 0.2 0.4 0.6 0.7 0.8 0.7 1.2 1.7 2.4 2.5 2.8 3.0 3.2 3.2 2.8 2.6 2.4 2.7 2.5 2.3

Annual % Change

Average Price

-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 11.8 10.6 11.0

162,262 162,245 162,638 164,630 165,586 167,912 168,941 170,825 170,514 172,127 173,678 174,566 175,826 176,491 177,846 180,264 183,577 186,512 188,903 188,949 189,306

Note: Historical figures including index levels can be viewed using the following link: http://www.nationwide.co.uk/about/houseprice-index/download-data

For more information on the impact of proximity to stations on house prices click on the links below: London transport special Manchester transport special Glasgow transport special


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. More information on the house price index methodology along with time series data and archives of housing research can be found at http://www.nationwide.co.uk/about/house-price-index/ Photographs of our economist are available at: http://www.nationwide.co.uk/about/media-centre-and-specialist-areas/media-centre/photo-library

Legal Information The Nationwide House Price Indices are prepared from information that we believe is collated with care, but no representation is made as to their accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the indices at any time, for regulatory or other reasons. Persons seeking to place reliance on the Indices for any purpose whatsoever do so at their own risk and should be aware that various factors, including external factors beyond Nationwide Building Society’s control might necessitate material changes to the Indices. The Nationwide House Price Indices may not be used for commercial purposes including as a reference for: 1) determining the interest payable, or other sums due, under loan agreements or other contracts relating to investments 2) determining the price at which investments may be bought or sold or the value of investments or 3) measuring the performance of investments. Nationwide Building Society is the owner of the trade mark “Nationwide” and all copyright and other rights in the Nationwide House Price Indices. The application of the IOSCO Principles on financial benchmarks to the NHPI is more fully set out in our statement regarding IOSCO Principles. Nationwide considers that its arrangements for administration of the NHPI comply with the IOSCO Principles in a proportionate manner having regard to the nature of the index.
