Foxtons, the famously bullish London estate agent, has seen its share price fall to a 52-week low. That doesn’t bode well for the capital’s house prices, says Dominic Frisby.
UK house price indicators
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.
What's the latest? June's RICS balance fell to 53, ie, 53% more surveyors saw prices rising than falling. The June Halifax UK three-monthly house price index saw a 8.8% 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 53%, will Britain's housing market keep climbing?
What's the latest?May saw UK NMLG rise to 2.1%. That compares with annual growth of 1.9% two years ago, 5.7% in December 2008 and 11.1% in February 2007. Meanwhile, the June Nationwide UK house price index is 11.8% 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 62,800 in April to 61,700 in May. And that's a long way from the peak of 129,168 approvals back in November 2006. Meanwhile, the June Nationwide UK house price index is 11.8% 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 June, the GfK rose to 1 - its highest since 2005. June's Halifax UK three-monthly house price index saw a 8.8% 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? June's UK CPI was up 1.9% year-on-year, compared to 1.5% the previous month. Meanwhile, RPI was 2.6% higher compared to 2.4% in April. The June Nationwide UK house price index is 11.8% 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
July 2014: The bubble continues Mortgage approvals slid to their lowest level in nearly a year in June. The Mortgage Market Review may be behind the drop. Yet houses are expensive, and are absurdly overvalued in London. America remains more appealing. The same goes for German towns beyond the overheated big cities.
• See our view on all the major asset classes here.
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