20 things

20 things you should know about…

31 March 2007

1 Nationwide Building Society has indicated that the price of a typical house increased by 0.4 per cent during March.

2 This increase brought the annual rate of house price inflation back into single digits at 9.3 per cent.

3 Nationwide revealed that the price of a typical property in the UK stood at £177,083 – £15,000 higher than at this time last year.

4 According to the study, this represented an equivalent of a monthly rise of £1,250 per month.

5 This also worked out as house price growth of an average of £41 per day.

6 The lender indicated that the three-monthly growth rate of 2.1 per cent was at its lowest since August.

7 Leading indicators of house price inflation also suggested that the underlying trend would continue to slow this year.

8 It was also expected that mortgage approvals and buyer enquiries at estate agents would weaken throughout the year, due to the Base Rate changes.

9 Nationwide indicated that its forecast of house price growth of 5-8 per cent in 2007 still looked on track.

10 For this to be met however, Nationwide implied that price rises averaging between 0.4 per cent and 0.7 per cent per month for the rest of the year would have to be achieved.

11 Commenting on the housing market, Fionnuala Earley, chief economist at Nationwide, said: “In spite of the cooling in demand, the UK housing market will remain fairly firm in the short term, partly because of the momentum built up in the market that will take a few months to work through, but also because of supply constraints.”

12 She added: “Not only are insufficient numbers of home owners putting their properties on the market, but levels of house building continue to undershoot the levels of demand. New data from the government shows an even higher expected number of household formations, yet house building targets remain woefully low, especially in parts of the South East.”

13 Nationwide indicated that new calculations released mean that the number of households projected to be formed in England each year has increased to 223,000, up from the projection of 209,000 this time last year.

14 However, with current rates of house building running at around 200,000 per year, this leaves a shortfall of over 20,000 frustrated households. With higher immigration assumptions, the annual projection increases to 255,000 per year, making a shortfall of 55,000.

15 Commenting on the Budget, Earley added: “The final Gordon Brown Budget was overall fairly neutral with most of the major fiscal announcements not coming in until the 2008/9 financial year. The Chancellor chose not to ease the Stamp Duty burden by indexing the thresholds, even though he has benefited enormously from the rise in house prices throughout his term.

16 “Back in financial year 1997/8 the Treasury’s revenue from Stamp Duty was just £830 million, whereas in 2006/7 we estimate the coffers will be swelled by more than five times this amount at £4.6 billion.”

17 Indices and average prices are produced using Nationwide’s updated mix adjusted House Price Methodology, which was introduced with effect from Q1 1995.

18 Price indices are seasonally adjusted using the US Bureau of the Census X12 method.

19 Currently the calculations are based on a monthly data starting from January 1991.

20 Figures are recalculated each month which may result in revisions to historical data.