MNI: UK Nationwide House Prices Edge Higher In December

--UK Nationwide Dec house price index 0.6% m/m, 2.6% y/y

     LONDON (MNI) - UK house prices edged higher in December, rising 0.6% on the

month and 2.6% on the year, up from 2.5% in October, the Nationwide House Price

Index showed.

     Annual house price growth in the Nationwide series has held in a 2 to 4%

range since March. The focus now will be on what impact the recent government

change to first-time buyer stamp duty levies will have on the housing market as

we move into the New Year.

     Nationwide's Chief Economist Robert Gardiner said that the cut in Stamp

Duty for property market newcomers should not have much impact on house prices

and was likely to be offset by other policy changes.

     "The impact of previous policy changes (including additional stamp duty on

second homes, changes to tax deductibility of landlord expenses and lending

criteria) meant that demand from buy to let investors remained subdued in 2017,"

he said.

     Despite a mixed economic message, Gardner said a lack of supply continued

to underpin the market, although offset somewhat by rising pressures on

household incomes.

     "Low mortgage rates and healthy employment growth continued to support

demand in 2017, while supply constraints provided support for house prices.

However, this was offset by mounting pressure on household incomes, which

exerted an increasing drag on consumer confidence as the year progressed," he

said.  

     Going forward, Gardner thought the continued squeeze on household budgets,

along with Brexit issues, would weigh on further house price growth.

     "We continue to expect the UK economy to grow at modest pace, with annual

growth of 1% to 1.5% in 2018 and 2019. Subdued economic activity and the ongoing

squeeze on household budgets is likely to exert a modest drag on housing market

activity and house price growth," he said.

     "Nevertheless, housing market activity is expected to slow only modestly,

since unemployment and mortgage interest rates are expected to remain low by

historic standards. Similarly, the subdued pace of building activity evident in

recent years and the shortage of properties on the market are likely to provide

ongoing support for house prices," Gardner added.

     "Overall, we expect house prices to record a marginal gain of around 1% in

2018. Over the longer term, once the economy regains momentum, we expect house

prices to rise broadly in line with earnings (around 3%-4% per annum), though if

the rate of house building fails to keep up with population growth, prices may

outpace earnings once again, as they have in recent years," he said.

     "As noted above, the UK housing market has been characterised by

significant regional disparities in house prices in recent years and it is not

clear how Brexit will impact these dynamics. Much will depend on the nature of

the Brexit impact on the UK economy (in terms of its impacts on different

sectors and the resulting geographic consequences)," he added.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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