Nationwide, the UK building society, announced today that house prices in the UK fell 0.9% in June. As the worry about the international credit crisis has expanded, the UK has moved centre stage in terms of concern over house prices. As a result, I have begun to track UK house prices alongside U.S. prices.
What is clear from the trend is that the UK bubble popped later than the U.S. bubble. However, the downward trend is as fast as in the U.S. Prices have now fallen for about a year, according to Nationwide.
Below are the Nationwide press releases on its housing index back to 2005. The index covers prices back to 1991. Reading through the press releases and the associated Chief Economist’s words about the state of housing should give one an insight into housing sentiment more widely in the UK market.
The Q2 report makes for especially good reading. Northern Ireland shows the steepest fall at 18.6% y/y. There is a huge north south divide, with prices falling in the south much less than in the north.
You should also find more information about house prices in my blog header under the tab ”Housing Prices.”
Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said:
“The pace of house price falls slowed significantly in June. House prices fell by 0.9% during the month, less than half of the rate of the 2.5% fall recorded in May. Prices in June are now 6.3% lower than this time last year and have fallen 7.3% from their peak last October. The price of a typical house is now £172,415. This is over £13,500 less than it would have cost at the top of the market and over £11,500 less than this time last year. However, the strength of house price growth up until last year means that prices are still 4% higher than two years ago and 9% higher than three years ago.
Inflation leads MPC to consider rate hikes
“The last month has been dominated by news on inflation and the economy. The Consumer Price Index measure of inflation exceeded its target by more than one percentage point in May leading to a formal exchange of letters between the Governor of the Bank of England and the Chancellor. It also led to market speculation that the Bank of England would begin to raise interest rates this year. However, the tone of the Governor’s letter to the Chancellor was relatively mild. While recognising the threat inflation poses, the letter suggested that the preference was to allow a slow adjustment to inflation over two years rather than introduce volatility in employment and output in order to return to target within a year. On the other hand, the minutes did reveal that the option of increasing rates was discussed, although no-one felt strongly enough to vote for it. The MPC is most concerned about inflationary expectations feeding into wage demands. As yet there is little sign of this. The latest data show underlying average earnings growth running at less than 4%. While there are some threats of industrial action, we have yet to see how far this will go, particularly as unemployment is beginning to increase. Nevertheless the MPC will be monitoring this very carefully.
“The adverse inflation developments along with the surprisingly strong retail sales data clearly make it less likely that the Bank of England will be able to rapidly reduce interest rates in response to a slowing economy. But we still think the next move in rates will be down. Our central expectation is that wage growth will remain stable, consumer spending will come under increasing pressure in the coming months and that the economy will continue to slow. If this proves correct, the MPC should feel able to adjust rates before the end of the year.
June 2008 Nationwide housing report (PDF 57KB).
2005 10 07 House prices stall in September
2005 11 01 Autumn rebound for house prices
2005 11 29 House Prices Return to Stable Trend
2005 12 30 Equities outperform housing for the first time this century
2006 01 31 Housing Market gets off to a strong start in 2006
2006 02 28 Doubts cast on recent strength of the housing market
2006 03 30 Spring Bounce in House Prices
2006 04 27 April Showers Cool House Price Growth
2006 05 31 House price growth sluggish in May
2006 06 29 House prices take it easy in June
2006 08 01 House prices warm up as temperatures soar in July
2006 08 31 House price growth firm in August
2006 09 28 House prices unseasonably strong in September
2006 10 31 Annual house price growth remains firm in October
2006 11 30 Housing market still refusing to cool
2006 12 28 House price growth moves back into double digits in December
2007 01 30 First signs of cooling emerge
2007 02 28 Interest rate hikes beginning to take their toll
2007 03 28 Spring loses some bounce
2007 04 26 Pick up in house price growth seals a May rate rise
2007 05 31 House price growth remains stubbornly in double-digits
2007 06 28 Rain fails to stop play in June’s housing market
2007 07 26 Brakes slammed on house prices in July
2007 08 23 Nationwide Building Society – August 2007 Monthly House Prices
2007 09 27 House Prices Appear to Shrug off Credit Crunch in September
2007 10 31 House prices remain stubbornly robust despite weakening demand
2007 11 29 House prices fall by 0.8% in November
2007 12 28 House prices fall by 0.5% in December
2008 01 31 Little movement in house prices during January
2008 02 29 House price inflation falls to 2.7% in February
2008 03 28 No bounce in house prices this Easter
2008 04 30 Housing market weakness stretches into April
2008 05 29 House price falls accelerate in May
2008 07 01 Pace of house price falls slows in June