United Kingdom: House prices slip in February
March 1, 2018
According to the Nationwide Building Society (NBS), house prices in the United Kingdom fell 0.3% in February compared to the previous month in seasonally adjusted terms, contrasting January’s revised 0.8% increase (previously reported: +0.6% mom). On an annual basis, house prices rose 2.2% in February, markedly undershooting analysts’ expectations of 2.6% and down from January’s 3.2%. The average house price in February was GBP 210,402 (February 2017: GBP 205,846).
February’s tepid figures come after a stronger-than-expected showing in January, and better fit the prevailing picture of gloomy consumer confidence and declining real purchasing power. In addition, mortgage approvals fell to a three-year low in December, while new buyer enquiries have remained limp in recent months.
Looking ahead, house price growth is likely to be minimal this year, reflecting a further economic slowdown and pressure on household budgets. However, a solid labor market and tight housing supply should continue to prop up prices. The future path of interest rates will be a key determinant of the evolution of the housing market going forward. In this regard, a more hawkish stance by the Bank of England at its most recent meeting suggests the potential for monetary policy to tighten faster than previously thought, which would likely put downward pressure on property prices.
Author: Oliver Reynolds, Economist