Investing in property

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UK house price indicators

To find out where Britain's house prices are heading next, we've hunted down what we believe are the best leading indicators for Britain's housing market. And for now, they mostly suggest that prices are heading for further falls.

We watch five indicators, all of which have proved useful guides in the past. These include the RICS Housing Market Survey and data on both mortgage lending and mortgage approvals. Consumer confidence is another useful data point we keep an eye on.

You can read in detail what each indicator suggests for UK house prices using the tabs above.
The RICS Housing Market Survey is arguably Britain's best house-price predictor. It's a monthly measure of how many surveyors are seeing UK house prices rise compared with those reporting falls.

What's the latest? September's RICS balance fell to 30, ie, 30% more surveyors saw prices rising than falling. The September Halifax UK three-monthly house price index saw a 9.6% year-on-year rise.

What does this mean for UK house prices? The RICS survey leads the Halifax index by around six months. With a balance of 30%, will Britain's housing market keep climbing?
The Bank of England provides monthly data on UK net mortgage lending growth (NMLG). Historically this has proved a handy guide to house prices.

What's the latest?September saw UK NMLG fall to 4.0%. That compares with annual growth of 1.9% two years ago, 5.7% in December 2008 and 11.1% in February 2007. Meanwhile, the October Nationwide UK house price index is 9.0% higher year-on-year.

What does this mean for house prices? This long-term collapse in NMLG suggests UK house prices are standing at the cliff face. If they follow net lending trends, residential property values could slump by over 15%.

The Bank of England's monthly 'mortgage approval for house purchase' figures are another useful forward indicator of UK housing market activity.

What's the latest? BoE mortgage approvals for house purchase fell from 64,054 in August to 61,267 in September. That's a long way from the peak of 129,168 approvals back in November 2006. Meanwhile, the October Nationwide UK house price index is 9.0% higher year-on-year.

What does this means for UK house prices? BoE mortgage approvals for house purchase lead annual percentage changes in the Nationwide UK ‘all houses’ price index by some four months. But with Britain’s recovery still fragile, a slide in house prices is still a possibility.

This gauges the monthly mood swings of Britain's consumers. It "tracks changes in personal finance, the general economic situation, inflation, unemployment, the current purchasing climate, and consumer spending and saving", say its compilers GfK/NOP.

What's the latest? For September, the GfK fell to -1. September's Halifax UK three-monthly house price index saw a 9.6% year-on-year rise.

What does this mean for UK house prices? This indicator leads the Halifax UK three-monthly house price index by some four months. The recent uptrend in the GfK indicates rising consumer confidence.

The UK CPI (consumer price index) is the most widely-used indicator of our cost of living.

What's the latest? September's UK CPI was up 1.2% year-on-year, compared to 1.5% the previous month. Meanwhile, RPI was 2.3% higher compared to 2.4% in August. The October Nationwide UK house price index is 9.0% higher year-on-year.

What does this mean for UK house prices? Higher CPI normally means higher interest rates. Despite the fall in UK CPI since 2010, inflation is still too high. It may drop more, but the historic relationship of higher CPI = less UK house price inflation will return at some point.


Property: the MoneyWeek view

October 2014: A pause for breath September saw the first monthly fall in UK property prices since April 2013. But we would advise eyeing up the US instead. The housing market there has paused for breath this year, and remains relatively good value even after rebounding after the crisis.

See our view on all the major asset classes here.

[FREE REPORT] UK property: Is it finally time to sell?

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