Nationwide House Price Review

http://www.nationwide.co.uk/hpi/historical/Jul_2009.pdf

Nationwide has predicted positive house price growth for the rest of 2009, after prices rose by 1.3% in July.

The average price of a property rose on a monthly basis, from £156,442 to £158,871. This is the third consecutive monthly increase in the index following on from a rise of 1% in June.

Although prices are 6.3% down annually, the three-month-on-three-month rate of change rose to 2.6% in July which is the highest level since February 2007.

Nationwide chief economist Martin Gahbauer says: “This suggests there is now a reasonable chance that prices could end the year slightly higher than where they started. Only a few months ago, such an outcome would have appeared unthinkable.

“Even if prices were to remain unchanged for the rest of 2009, the year-on-year rate would continue to improve since prices were falling very sharply in the second half of last year.”

Gahbauer says this increase follows other recent economic indicators and asset prices, which have also bounced back somewhat after very severe declines around the turn of the year.

Gahbauer adds house prices had been “remarkably resilient” so far this year, despite a sharp rise in unemployment and other economic problems.

But he adds: “During turbulent economic times it is not unusual for economic indicators and asset prices to overshoot in one direction and then experience a correction in the other.

Seema Shah, property economist at analyst Capital Economics, is also concerned about making conclusions on such a limited sample of data.

“The third consecutive rise in the Nationwide index indicates that the shortage of properties for sale is providing some short-term support for house prices, but this is not a sound basis for a sustainable recovery,” she warns.

“At some point, rising prices will simply entice more sellers onto the market, restoring the demand/supply balance. In addition, new buyer interest is vulnerable to both rising unemployment and still tight credit conditions.”

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