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Thursday, March 03, 2016

Nationwide house price growth up - 4.8%

Nationwide's HPI figures for February show a small acceleration in annual house price growth.

House prices were up 0.3% in February, bringing the annual growth to 4.8%.* Seasonally adjusted figure.

Robert Gardner, the Nationwide's Chief Economist, comments:

“UK house price growth remained steady in February, with prices increasing by 0.3% during the month, unchanged from January’s reading.

Annual house price growth has remained in a fairly narrow range between 3% and 5% since the summer of 2015. This trend was also maintained in February, with house prices up 4.8% over the year, a slight pickup from the 4.4% increase recorded in January.

The number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014.

However, much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer.

Looking through this volatility we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support.

Gardner also highlights the stabilising of home ownership rates -

“After declining gradually over the past twelve years, the rate of home ownership in England stabilised in 2014/15. However, at 63.6%, this is well below the peak of 70.9% recorded in 2003.

If we look at the shift in tenure patterns by age over the past decade, we see a particularly marked decline in home ownership rates amongst the younger age groups, especially amongst 25-34 year olds, traditionally the segment containing most first time buyers. While there was a marginal uptick in 2015, the proportion of younger adults who own their own home (currently 37%) remains considerably lower than ten years ago.

home ownership rates in the UK - graph

Over the same period, the proportion of people renting (either privately or through a local authority or housing association) increased from 43% to 63%. For 16-24 year olds, the proportion renting increased from 73% to 92% over the same period.

The increase has occurred in the private rental sector, which currently houses 19% of total households. Over the past ten years, the number of privately rented households has increased by 75% to 4.3 million.
The latest English Housing Survey showed that the proportion of private renters who expect to buy a home at some point in the future declined by four percentage points from 61% to 57% - the lowest reading since the survey began in 2008/09. Even amongst those who expect to buy a home, for most this remains a longer term aspiration, with 75% expecting it to take at least two years.”

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