UK house prices into double digit growth says Nationwide House Price Index

on May 1, 2014
Updated: Oct 21, 2019
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Property prices in the UK are gathering steam according to the Nationwide’s April edition of its House Price Index. Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, commented:

“After several months of moderation, the pace of house price growth picked up in April, with prices rising by 1.2% during the month. As a result, annual house price growth has reached double digits for the first time in four years, with the price of a typical home 10.9% higher than April 2013.
“The introduction of Mortgage Market Review (MMR) measures could have an impact on activity levels in the months ahead as the new measures bed down. However, underlying demand is likely to remain robust, as mortgage rates remain close to all-time lows and as consumer confidence improves further on the back of stronger labour market conditions and the brighter economic outlook.

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** Earning outpace cost of living and construction lags demand**
“Earnings growth is beginning to pick up, with wage increases finally outpacing the rise in the cost of living in February. Nevertheless, house price growth is outstripping income growth by a wide margin. The risk is that unless supply accelerates significantly, affordability will become stretched.

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“The upturn in construction of new homes continues to lag far behind the upturn in demand, with the number of new homes being built in England still around 40% below pre-crisis levels (and this was already insufficient to keep up with the increase in the number of households being formed).
MMR measures, which place a greater emphasis on affordability, should help to ensure that prices do not become detached from earnings. Higher priced areas of London and South East have experienced larger price gains “A notable feature of the upturn in the housing market is that price growth has been significantly stronger in the South of England, especially in London and the South East. In the first quarter of 2014, prices in the capital were around 20% higher than their pre-crisis levels, while in the UK as a whole prices were still around 2% lower.

**Top end of the market driving growth in London**
[!fm[](/uploads/story/10676/nationwide_2.png)](# “”)
“Interestingly, price growth in London and the South East appears to be being driven by the top end of the market, with higher priced locations recording stronger price growth. This is illustrated in the chart below, which shows that higher priced areas have seen larger price increases in percentage terms since prices were at their trough in mid-2009.

“This pattern accords with housing transactions data, which shows that higher priced properties in London and the South East have accounted for a higher proportion of transactions. For example, in London the proportion of housing transactions involving properties over £500,000 has increased from 13% in 2007 to around 25% in 2013. The share involving properties of over £1m has more than doubled from 3% to more than 6%.”
[!fm[](/uploads/story/10676/nationwide_3.png)](# “”)

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