UK sees the biggest drop in house prices in 14 years
The Nationwide House Index has seen prices fall by 5.3% year-over-year in August, the biggest drop since 2009.
It also fell more than expected in August, month-on-month, down 0.8%, against expectations of a 0.3% fall. It all adds up to signs that interest rate hikes are clearly talking their toll on the property sector.
(Video Transcript)
UK house prices
We've seen the biggest drop in UK house prices in 14 years according to the August report out on the Nationwide House Price Index. Let's take a look at the numbers as we saw them break this morning. In terms of the month-to-month moves, it was a 0.8% decline. We've been looking for 0.3% fall. Year-on-year though, down 5.3%. We've been looking for a drop of 3.9%.
This represents a larger fall than what had been expected. A sign clearly that interest rates are taking their toll on the property sector overall. But the good news is, it hasn't really dented house prices that much in terms of share prices of those companies that actually build the products. Let's take a look at some of the charts.
Barrett Development
Barrett Development down for a second day, down by a margin today of 0.5% building on that small drop that we saw in yesterday's trade. Just a quick tour around some of the other big house builders. Taylor Wimpey, again, another one that's down for a second day in a row. Today it's down almost 0.9% of 1%. This is after 20 minutes of the session in today's trade.
Redville, another one on the way down. Persimmon, every single house builder has been affected. In fact, Persimmon over the longer term has been more affected than most on the downside. Going back to what's been happening with the likes of Barrett Developments. In fact, I think you can see here that we've been picking up a little bit recently.
Bank of England
The outlook is still very clouded, very tough. We don't know when the Bank of England is going to finish raising interest rates. It's looking like we could well get another quarter point coming through next time the Bank of England meets. Inflation is still high. That's the problem.
UK inflation
Inflation within the building sector is high, with building materials high. Inflation is high in terms of wages. With house prices dropping, it means that margins are shrinking for these big house builders.
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