Nationwide HPI: Some good news at last from the bank?

Warren Lewis
1st February 2018
house stats

Nationwide haven't given us much to smile about recently. Their website and banking app crashed on Tuesday leaving thousands of customers locked out of accounts and at the mercy of a tech suport team that didn't seem to know what to do. And all this was on the back of a weaponised ad campaign designed to render the viewer stiff with rage featuring the planet's most irritating 'sisters', so it was time for some good news from them.

So what are they saying?

According to the data released, the headlines are that annual house price growth accelerated to 3.2% during last month, month-on-month pace of increase steady at 0.6% and home ownership appears to have stabilised.

Robert Gardner, Nationwide's Chief Economist, gives further insight into this morning's data:

“The annual rate of house price growth picked up to 3.2% at the start of 2018, compared with 2.6% at the end of 2017. House prices increased by 0.6% over the month, after taking account of seasonal factors, the same increase as December.

The acceleration in annual house price growth is a little surprising, given signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.

Similarly, mortgage approvals declined to their weakest level for three years in December, at just 61,000. Activity around the year end can often be volatile, but the weak reading comes off the back of subdued activity in October and November (monthly approvals were around 65,000 per month compared to an average of 67,000 over the previous twelve months). There are few signs of an imminent pickup, as surveyors report that new buyer enquiries have remained soft in recent months.

But activity has been subdued on both the demand and supply side of the market. The flow of properties coming onto estate agents’ books has been more of trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.

How the housing market performs in the year ahead will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to foresee.

We continue to expect the UK economy to grow at modest pace, with annual growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing squeeze on household budgets is likely to exert a modest drag on housing market activity and house price growth.

Nevertheless, housing market activity is expected to slow only modestly, since unemployment and mortgage interest rates are expected to remain low by historic standards. Similarly, the subdued pace of building activity evident in recent years and the shortage of properties on the market are likely to provide ongoing support for house prices."

And as you would expect, the property industry was quick to react. Here's what they are saying:

Russell Quirk, founder and CEO of, commented: “Further signs that the market is beginning to find its feet in the New Year, shaking off the Christmas price lull and continuing to stabilise in the wake of the Brexit vote, albeit at a slow and steady pace.
However, while we remain a nation of aspirational home buyers and the level of those owning their own home has remained fairly robust over the years, their ageing population and the continued increase of the private rentals sector highlights a broken market, working against, and not for first-time buyers in particular.
Yes, the outlook for the economy is modest and both interest rates and unemployment are expected to remain low, but with as many sellers currently sitting on the fence as buyers, the severe lack of housing stock available for those looking to get on the ladder has been further exacerbated.
As a result, even in slower market conditions, the financial barrier to homeownership has continued to grow, putting it further out of reach for the average UK buyer. Will the Government do anything meaningful to address this lack of supply over the coming year? I would think it very unlikely indeed.”

Jonathan Samuels, CEO of the property lender, Octane Capital, had this to say: "The rebound in annual price growth is less about demand strength than supply weakness.
Against a backdrop of squeezed incomes and Brexit-related uncertainty, demand is understandably subdued, but prices are being supported by the sheer lack of homes for sale and the low cost of borrowing. With so many economic and political unknowns on the horizon, 2018 looks set to deliver a year of low single digit growth.
Many households are likely to sit tight for another year, or at least until there is more clarity on the outcome of Brexit negotiations.The fall in homeownership among 35-44 year olds underlines the depth of the affordability crisis.
For anyone born on this side of the seventies, getting onto the property ladder can prove a major struggle."

Lucy Pendleton, founder director of independent estate agents James Pendleton, said: "Pent up demand appears to have shot off like a coiled spring as soon as New Year was out of the way.

Estate agents famously watch January like a hawk for signs of buyers and vendors flooding back into the market and kickstarting activity. That's exactly what they've done, causing prices to bunny hop up as buyers compete for stock. It runs totally counter to what the industry braced for after a trio of reports from Lloyds, the CBI and Ipsos Mori all pointed to a slowdown in UK economic growth in the first few months of the year amid falling consumer confidence.

That doesn't seem to apply to mortgages and the likely reason for this is that mortgages are still good value by historic standards, even if the price to income ratio on purchases is close to ten-year highs.

London, which was the only region to fall year-on-year to December, is still buoyant but only in certain bands. Those homes that are not quite so desirable still require a motivated seller willing to negotiate if they’re to sell quickly but that’s been the case for a few months now.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "This uplift is not really surprising to us at all bearing in mind the increase in viewings estate agents are seeing as the market emerges from its winter hibernation.

At the sharp end we have seen an uplift in terms of viewings and more confidence than we dared to expect. Looking forward we have to now make sure as many of those enquiries as possible translate into sales, which will be the real test for the market this year.

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "With average mortgage rates continuing to fall, as more lenders come into the market and compete for business, this is likely to continue to support property prices this year to an extent. Lenders remain keen to lend so if deposits can be found, first-time buyers will continue to come to the market in reasonable numbers, which is great for its overall health."

Jeff Knight, Director of Marketing at Foundation Home Loans, commented: “Annual prices may have risen, but borrowers are starting the year with a modest wage growth as well as the effect of an increase to the base rate from the Bank of England. The cut to stamp duty for first-time buyers has certainly nudged up growth, but it remains to be seen whether this alone helps them to jump through the other affordability hoops.”

Securing the finance to purchase a property can be challenging enough, even more so for those with previous blips on their record. It’s therefore crucial we start the year as we mean to go on, ensuring all those trying to get a leg-up on the ladder are fully supported - as well as a joined up approach to addressing the supply issue that will develop houses for renters and buyers alike.”

Paul Osborn, Chief Executive for Foresters Friendly Society commented: “For many, home ownership is the top savings priority, but it continues to be a tricky environment for first-time buyers. With house prices continuing to increase faster than wages, reaching that goal is going to be even trickier.”
Luckily there are products out there that can make a real difference. The Lifetime ISA (LISA), designed specifically to help those under 40 years old achieve their long-term savings goals, offers a 25% boost to annual savings. But our research shows that although there’s strong awareness of the LISA, just 11% of those eligible are currently taking advantage of these benefits. This highlights the need for improved education on the importance of fostering an early savings habit. Choosing the right product along the way will help bring the goal of home ownership that much closer.”

Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, comments: “The monthly increase in house prices of 0.6% for the second month running confirms that investing in property is still the best way to maximise your capital. A typical £100,000 apartment has risen in value by £600 per month for the last 2 months and by £3,200 over the last 12 months. An excellent return for any investor, but for those that have purchased using a 75% loan to value buy to let mortgage, it actually represents a monthly return on their cash invested of 2.4% per month. Locations that have low prices, high rental yields and constant tenant demand such as Manchester and Liverpool have been performing at above the national average and can return even greater returns.”

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