Index shows that price of average property is 0.7% lower than a year ago
The latest Nationwide Index, which is celebrating 60 years, shows that house prices rose 0.3% in May and the price of an average property is now 0.7% lower than a year ago at £166,022.
‘The Nationwide House Price Index has reached an important milestone as it was first produced in 1952, and has therefore run for the Queen’s entire reign. According to our data the average UK house price has increased from £1,891 to £166,022 during the Queen’s reign, that’s almost an 88 fold increase over the 60 year period, while the cost of goods and services have recorded a more modest 25 fold increase,’ said Nationwide’s chief economist Robert Gardner.
‘Dramatic increases might be expected over such a long timeframe, but over the last 18 months house prices have been fairly stable, despite the challenging economic backdrop. May’s data provides some comfort that this pattern is being maintained,’ he explained.
‘However, demand for homes remains subdued on the back of weak labour market conditions, but the lack of homes coming onto the market is providing support for prices. This is in part a reflection of the low rate of building in recent years which has failed to keep pace with household formation,’ he added.
The Nationwide index shows that there was little change in prices from 1952 until the mid 1950s, although prices fell slightly in 1953 and 1954. House prices rose in every single 12 month period for 35 of the last 60 years, from 1955 to 1990.
‘As inflation began rising in the 1960s people began to realise that the easiest way to benefit from high inflation was by owning their own property as it was the one substantial physical asset people were able to acquire by borrowing, and everyone has to live somewhere,’ said Ray Boulger of independent mortgage advisors John Charcol.
In the fourth quarter of 1959 the annual increase reached 5% for the first time and despite some small falls on a quarterly basis there was then an unbroken run of increases in every single 12 month period from the first quarter of 1955 to the second quarter of 1990.
As a result of the mad market in 1988/89 house prices rose at an annual rate of 32% in the first quarter of 1989 and the index, which started at 100 in 1952, peaked at 3,320 in the third quarter of 1989. The market then collapsed, with the index falling 20% in nominal terms by the first quarter of 1993.
‘However, as there was 20% inflation over this three and a half year period the fall in real terms was far higher. After treading water for three years the market started a strong recovery, initially focussed primarily in London and the South, which lasted 11 years, before peaking in the third quarter of 2007,’ explained Boulger.
Between the fourth quarter of 1995 and the third quarter of 2007 prices rose by 262% but have since fallen back 11.6%.
‘Over the last 60 years the price of the typical house which the index measures has risen by a massive 8,680%. Over the same period the Retail Price Index rose by 2,500%,’ added Boulger.