UK House Prices Recorded Modest Recovery of 1.9% in January 2020- Nationwide Report

• Annual growth in house prices was 1.9%.
• MoM rise is at 0.5%, post consideration of seasonal factors.
• Average house price in January 2020 was stood at £215,897
• Nationwide House Price Index stood at 434.4 in January 2020 against 432.2 in December 2019.
• Annual surge in house prices was at a 14-month high.

According to data revealed by Nationwide, house prices in the UK recorded a modest pickup in January 2020 on an annual basis, as January 2020 house prices were 1.9% higher against the year-ago period. Last December, prices were up by 1.4% against the corresponding year-ago period. The annual surge in house price in January 2020 was the highest in the past 14-months. The reported numbers show other signs of revival in the home market. Also, the number of mortgages approved by the UK's high street banks surged to the highest level in the past five years to December 2019.

However, on a Month-on-Months (MoM) basis house prices in Britain grew by just 0.5% against December 2019. January 2020 figure was the 12^th consecutive months, in which monthly price growth was lower than 1%.

Also, the latest English Housing Survey conducted by the Ministry of Housing, Communities & Local Government (MHCLG) reported an upward trajectory in the home-ownership rate for 2019 which stood at 63.8% against 63.5% in 2018, which is a marginal increase on a YoY basis. There was a marginal uptick in a number of people owning their houses with a mortgage; however, majority of the surge was on account of those who own their property outright and primarily supported by national trends. Meanwhile, the number of privately rented houses recorded a modest growth and reached to 4.6 million; however, there was little decrease in the proportion of household that rent privately to 19.3%, which was 1% lower against the peak in 2017.

However, there was an uptick in the number of homeownerships among 25-34-year age group, primarily on account of expanding labours market in the country and this could help to recover some of the deterioration witnessed in the past 15-years.

Encouraging jobs market condition and government schemes pertaining to Help to Buy equity loan have supported firm tome home buyer's activity in the housing market. Nevertheless, homeownership between 25-34 age group at 41% is way below the park of 59% recorded in 2004.

Robert Gardner| Nationwide's Chief Economist commented on figures and said that Data released for January 2020 continue to paint a mixed picture and economic growth seems to have come to a halt at the end of 2019, although business surveys conducted point to an uptick at the start of the New Year. The job market was amazingly fantastic in the three months ended to November 2019, with the British economy having added 200,000 and more jobs, which is the most significant surge since 2018.

He also added that the number of mortgages approved by the British high street banks for home purchase remained within the modest narrow range that has been prevailing over the past two years. This has led to a housing market activity broadly stable. Also, improving jobs market condition and lower interest rate seemed to have offset the lag from the uncertain economic outlook.

However, more will depend upon domestic economic performance post first level of Brexit and this would remain a key driver for housing market trends and house prices. And a lot would depend upon the future relationship between the UK and EU, as well as the outlook for global growth.

At last, he said that the economy would continue to grow at a modest pace during 2020, and prices in the home market would be broadly stable for the next 12-months.

Another property website, Zoopla yesterday released its separate findings. It revealed that the property prices for Britain’s top 20 cities nudged higher by approximately 3.9% in January 2020 against the month over the period, with Edinburgh recording the highest uptick of 6.1% while property in the City (London) gained around 1.9%, the most significant increase over the past two years. It also reported that demand for houses among the surveyed cities shot up 26%.

Meanwhile, experts forecast a more significant surge in the region’s property market in the next couple of months.

Samuel Tombs | Economist at Pantheon Macroeconomics commented that “demand indicators at the very start of the home buying process are very promising. He thinks that the pickup in demand can be sustained in 2020 by the continuation of lower mortgage rates and solid wage growth, driving prices up by about 4%,”

Some experts said that the rally is on account of the stonking mandate bagged by Boris Johnson in the December 12, 2019, general election. Still, they also raised a red flag over this as they consider that this could be short-lived, as Brexit fog continues to hover over the economy, which could jolt demand contribution from EU citizens in housing activities.

Recently Halifax house price index reported that housing prices in December 2019 shot up by 4.0 on a YoY basis and monthly prices shot up by 1.7% against November 2019. Yearly growth was broadly supported by a 1.7% surge in December 2019, which was the largest surge in a month in 2019.

In its report, Managing Director of Halifax, Russel Galley stated that going forward they expect economic uncertainty to ease in 2020 and this could help boost volume of trade in the housing market and the improvement in labour market conditions would result in a demand uptick on account of surge in the real income of households.

He also added that longer-term issues such as the availability of homes for sale and lower levels of house-building activity will continue to drag supply, while the ongoing challenges faced by prospective buyers in sourcing deposits will serve to offset demand. As a result, he expected a more reasonable pace of gains to continue into the next year.

It seems that supply constraints would lead to higher competition in the most desirable areas of the UK and prices could move up significantly at these locations.

Also, the property prices in some part of the City (London), surged by approximately 10- times since June 2016. In some regions, prices have increased by a minimum 5-times in the East Midlands, in places like Corby and Leicester, Wales, and the West Midlands, as per a media report.