UK House Prices Continue Recovery in November

House prices are a major economic indicator for the UK. They are seen by many as a measure of the housing market, and also as a gauge of consumer confidence and spending potential. So after a substantial run-up in those prices from 2001 through the middle of last year, it was of no small concern that they flattened out until a few months ago.

The measure here is the "Halifax House Price Index", a compilation by the country's largest mortgage lender, HBOS plc. It is based on about 15,000 home sales monthly; the data are adjusted for the size and style of home, so that month-to-month comparisons are calculated from like or "standardized" properties. Thus, the index measures only price change, not movements due to differing house or location characteristics.

The index began to rise again in June after stagnating for nearly a year. A 1.2% rise in November was the fifth increase in six months, and over the last six months, prices have gone up at a 9.7% annual rate. This compares with a low in the six-month annualized percent change of -0.4% in July. Relative to the enormous increases in 2002 and 2003, the recent pace is not fast, but it clearly is an improvement over the weakness of earlier this year. Accompanying data show that the recovery has been firmer in the existing home segment than in new houses. And as shown in the second graph, prices of the obviously smaller homes purchased by first-time buyers have generally been more vigorous than those bought by previous home owners.

All these data are in Haver's UK database, plus quarterly data for the various regions of the UK. Halifax's researchers publish the data both unadjusted and seasonally adjusted.