Nationwide House Prices (Jan.) - Capital Economics
UK Housing

Nationwide House Prices (Jan.)

UK Housing Market Data Response
Written by Andrew Wishart

The small drop in Nationwide house prices in January, the first since June last year, is an early sign of the reversal in the 2020 house price surge we expect to see this year as the stamp duty holiday ends and unemployment rises.

First drop in prices since June is a sign of things to come

  • The small drop in Nationwide house prices in January, the first since June last year, is an early sign of the reversal in the 2020 house price surge we expect to see this year as the stamp duty holiday ends and unemployment rises.
  • The 0.3% m/m drop in house prices in January was the first fall since June 2020, the month before the Chancellor announced the stamp duty holiday. (See Table 1.) As a result, annual house price inflation eased from +7.3% to +6.4%, below the consensus expectation of a fall to +6.9%.
  • Nationwide record house prices at the mortgage approvals stage, which is usually two months before completion. The backlog of transactions conveyancers are working through makes it uncertain whether those applying for a mortgage last month will benefit from the stamp duty holiday, and the savings this implies, so the drop in prices is not surprising. Indeed, the government reiterated its line that the stamp duty holiday would end in March as planned in the debate on the petition to extend the relief held yesterday.
  • Rightmove’s index of asking prices, which tends to lead the Nationwide data by a month, fell more sharply in January suggesting that the scale of price falls will increase in the months ahead. (See Chart 1.) So the historical pattern of momentum in house prices changing direction at the end of a stamp duty cut looks like it is being repeated.
  • We expect house prices to dip by 4% this year as transaction volumes thin out after the stamp duty holiday and a further rise in unemployment leads to a modest increase in forced sales. (See here.) That said, a swift economic recovery and good mortgage affordability should prevent a prolonged slump.

Chart 1: Nationwide & Rightmove House Price Indices (% y/y)

Sources: Nationwide, Rightmove

Nationwide House Prices – Key figures

2020

2021

*Seasonally adjusted

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

House prices (£000s)

215.9

216.1

219.6

222.9

218.9

216.4

220.9

224.1

226.1

227.8

229.7

230.9

229.7

%m/m*

0.5

0.4

0.9

1.1

-1.6

-1.5

1.8

2.0

0.9

0.8

0.9

0.8

-0.3

%3m/3m*

0.5

0.8

1.2

1.7

1.5

0.2

-1.0

-0.4

1.8

3.6

3.7

3.0

2.2

%y/y

1.9

2.3

3.0

3.7

1.8

-0.1

1.5

3.7

5.0

5.8

6.5

7.3

6.4

Source: Nationwide


Andrew Wishart, Property Economist, +44 (0)7427 682 411, andrew.wishart@capitaleconomics.com