Tuesday, February 28, 2006
No boom in house prices
Posted by David Smith at 10:45 AM
Category: Thoughts and responses

The signals are mixed but Nationwide's report of a 0.2% drop in house prices in February and slghtly soft January mortgage approvals have reduced the likelihood of another sharp upward lurch in house-price inflation. The Nationwide itself is relatively downbeat, heading its press release "doubts cast on recent strength of the housing market". This is good news, which may even have implications for interest rates.


Hi David

Using one months months figures to say their isn't a boom,is rather extropolating things a bit far isn't it, especially as it was after last months 1.5% gain.

As for the BBA approval levels they were down from Dec by 12%, and seasonally we would expect them to fall between 10% and 15%. You can use the BOE Seasonal Adjustments for approvals for this , or here is a nice graph, form the Nationwide report


So the numbers are roughly in line with waht could be expected, which would mean the BOE coming out with a number approx equal to last months 122K

Here are the times when approvals were at this level before and the MoM HPI from the Halifax

28-Feb-02 125 1.0%
31-Mar-02 122 0.7%
31-May-02 122 3.9%
31-Aug-03 122 1.2%
30-Sep-03 131 1.6%
31-Oct-03 129 1.4%
30-Nov-03 133 1.1%
31-Dec-03 131 2.0%
31-Jan-04 127 2.3%
29-Feb-04 125 1.7%
31-Mar-04 123 2.2%
31-May-04 122 2.2%
31-Dec-05 122 0.9%

Basically I disagree that the BBA numbers were slightly weak, I believe that they are historcally strong enough to generate significantly above wage inflation HPI

I Hope you think it makes a refreshing change to have someone who thinks you are a bit bearish?

Posted by: kingofnowhere at February 28, 2006 11:32 AM

Hi there,

I'm glad that Nationwide has woken up to how their monthly results are currently being used by the BofE to steer the economy away from falling house prices.

Both Nationwide and the MPC should beware though. If this is not shown to be the current trend by other lenders, Nationwide's plan will backfire, as the results might be attributed to poor performance. The BofE also has to watch out that at some point soon, lowering rates to influence house prices will be like pushing on a piece of string if affordability remains a problem.

kingofnowhere's comment provides some much-needed cheer for property investors, and to an optimistic estate agent this may appear to bolster the case for a drop in interest rates this month. However I doubt the MPC will be convinced. Commercial and domestic utility bills are soaring, and there's no incentive to save for our pensions. In a wider context, the global credit boom is grinding to a halt and Euroland has already raised their interest rates.

Posted by: Paul Owen at March 1, 2006 12:50 PM

Surely the country will soon wake up to the fact that the recent rises in the cost of utilities, council tax and inflation busting increases to salaries can only mean a rise in interest rates.

Regardless of what Nationwide or any other 'expert' says, any rise in interest rates stretches affordability and makes current prices unsustainable. The housing market is nothing but a house of cards currently glued together by spin.

Posted by: Dr Chapman at March 1, 2006 02:05 PM
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