Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

UK Housing Market Transactions Slump to Historic Low

Housing-Market / UK Housing Jul 01, 2008 - 12:15 PM GMT

By: Nationwide

Housing-Market Best Financial Markets Analysis Article• House prices fell by 0.9% in June, less than half the rate of the previous month
• Prices are 6.3% lower than this time last year, but remain 4% higher than 2 years ago
• House purchase transactions remain subdued across the UK
• Northern Irish and Scottish activity levels stand out at each extreme


Headlines  June 2008  May 2008 
Monthly index * Q1 '93 = 100 342.3 345.5
Monthly change* -0.9% -2.5%
Annual change -6.3% -4.4%
Average price £172,415 £173,583

* seasonally adjusted

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.

Volatile markets still affecting mortgage pricing

“While we do not expect an early change in the Bank Rate, the implications of inflationary pressure on funding rates are more stark. The two year swap rate, which is the underlying benchmark for the most popular types of mortgage, (two year fixed rate loans) has increased along with market expectations of increases in bank rates and this has resulted in more frequent mortgage repricing. The tightening of credit conditions over previous months along with changing expectations of house price growth and a general weakening in consumer confidence in the economy have hit mortgage demand and led to a severe slowing in the levels of housing market activity. The latest data from the Bank of England shows house purchase approvals fell sharply in May to 42,000 down from 58,000 the previou month.

Transaction levels are key to house price movements

“The level of transactions is a key driver of house prices. Changes in transaction levels are a good indication of the likely path of prices and across housing cycles have tended to lead changes in house prices by a few months. In the most recent cycle the number of house purchase approvals began to moderate in the first quarter of 2007, whereas annual house price growth did not begin to slow until the third quarter. The number of house purchase approvals per month is now at historic lows and in May was running at less than half of its long run average rate.

“However the overall level of house purchase approvals masks a number of things. Looking at the mix provides some interesting information. Data on regulated mortgages does not include buy-to-let loans, but interpolating this from CML’s survey data shows that demand for house purchase from all sectors of the market has dropped off this year1, but what is more interesting is which sectors of the market have been most affected.

“Perhaps surprisingly given the poor affordability conditions, first-time buyers activity as a proportion of overall house purchase completions has held up fairly well. First-time buyers accounted for about one third of house purchase transactions in the first quarter of the year, exactly in line with the average over the last three years. However, movers’ activity fell back further. Movers accounted for about half of all house purchases in the first quarter, below the 55% average of the last three years. In contrast, estimates of buy-to let house purchase activity held up very well. These purchases accounted for about 19% of house purchase completions in the first quarter – significantly more than the average over the last three years of 14%.

“No regional buy-to-let data activity is available, but the relationship between house prices and regulated house purchase transactions also stands up when looking across the regions. Controlling for the different sizes of the regions by looking at the average turnover rate2 in the last year shows the relationship very clearly. Those regions with the highest turnover generally have had the most resilient house prices.

London and the South East stand out from the trend with relatively higher turnover rates, but this is likely to be a reflection of the greater mobility of the population in these regions. However the comparison between the best and worst performing parts of the UK, Scotland and Northern Ireland, is very stark. Indeed, both of these regions also stand out at the extremes for currently being furthest above and below their average contribution to overall house purchase transactions in the UK over the last three years.

“With house purchase transactions so far below their long term trend it seems unlikely that there will be any rapid turnaround in housing market fortunes in the coming months. However, as prices continue to fall affordability measures become more favourable for those in a well financed position to be able to buy.”

Fionnuala Earley
Chief Economist
Tel: 01793 656370
fionnuala.earley@nationwide.co.uk
Katie Harper
Media Relations Manager
Tel: 01793 656215
katie.harper@nationwide.co.uk

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. 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

http://www.nationwide.co.uk/

Nationwide Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules