September’s fall in the Halifax house price index chimes with the message from the alternative measures and suggests that house price inflation is subdued. Indeed, with house prices already high and interest rates unlikely to fall much further, we don’t expect to see a pick-up in house price growth anytime soon.
Subdued house price growth here to stay
- September’s fall in the Halifax house price index chimes with the message from the alternative measures and suggests that house price inflation is subdued. Indeed, with house prices already high and interest rates unlikely to fall much further, we don’t expect to see a pick-up in house price growth anytime soon.
- The Halifax House Price Index recorded a 0.4% m/m fall in house prices in September, reversing August’s 0.2% m/m rise. (See Table 1.) What’s more, the monthly fall brought the annual rate of house price growth down to just 1.1%, the slowest pace since mid-2013.
- The monthly drop in Halifax’s measure of house prices chimed with the Nationwide measure, which also fell on the month. But while annual growth on the revamped Halifax index, which came into force in August, is now broadly in line with the pack, it was still a little faster compared to the alternative measures. (See Chart 1.) Indeed, the Nationwide index rose by just 0.2% y/y in September.
- The big picture is that house price growth is weak, and we doubt it will pick up anytime soon. For starters, house prices are already high relative to incomes and buyers are constrained by what they are willing and able to borrow. What’s more, not only has ongoing Brexit uncertainty put buyers off, but it has also weakened the economic backdrop. In all, we expect house prices to rise by just 1% y/y in 2019, assuming a no deal Brexit is avoided.
- Beyond that, even if a Brexit deal is struck by the Halloween deadline, we still expect house price growth of less than 2% y/y out to 2021. Any economic recovery in 2020 and 2021 following a Brexit deal would be accompanied by rising interest rates, which will offset any boost to sentiment. That said, we doubt a no deal Brexit would be as bad as many fear. Indeed, we think that transactions, rather than house prices, are more likely to be hit due to any heightened uncertainty and economic disruption.
Chart 1: Alternative Measures of House Prices
Sources: Nationwide, Halifax, Rightmove, ONS
Halifax House Prices – Key figures
House prices (£000s)
Gabriella Dickens, Assistant Economist, 020 3974 7421, email@example.com