Nationwide House Price Index grinds to a halt

The Nationwide House Price index for June has been released and is showing annual house price growth has ground to a halt as the impact of the pandemic filters through with prices down 0.1%.

This is the first negative annual growth since 2012 and prices also fell 1.4% month-on-month, after taking account of seasonal factors.

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:

“UK house prices fell by 1.4% in the month of June, after taking account of seasonal effects, following a 1.7% fall in May. On a seasonally adjusted basis, house prices in June were 3.2% lower than in April.

“Annual house price growth slowed to -0.1%, from 1.8%in May. This is the first time that annual house price growth has been in negative territory since December 2012.

“It is unsurprising that annual house price growth has stalled, given the magnitude of the shock to the economy as a result of the pandemic. Economic output fell by an unprecedented 25% over the course of March and April, almost four times more than during the entire financial crisis.

“Housing market activity also slowed sharply as a result of lockdown measures implemented to control the spread of the virus. While latest data from HMRC showed a slight pick-up in residential property transactions from April’s low, in May they were still 50% lower than the same month in 2019. “Mortgage activity saw an even more dramatic slowdown as there were only 9,300 approvals for house purchase in May, down from 73,700 in February and 86% lower than in May 2019. However, our ability to generate the house price index has not been impacted to date, as sample sizes have remained sufficiently large (and representative) to generate robust results.

“With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels. Nevertheless, the medium-term outlook for the housing market remains highly uncertain. Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve (including any behavioural shifts).

“The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.

“These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.

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