The Nationwide House Price Index was released today showing annual growth to the end of August of 5.6%. This compares to 5.2% annual growth to the end of July amid signs that all of the doom and gloom surrounding Brexit could be overdone. While sceptics point out that the Nationwide index is the only one of late to show growth since the Brexit, perhaps it is the other surveys which are wrong?
Nationwide is much respect
Isn’t it ironic that sceptics are choosing to ignore the Nationwide House Price Index when it does not support their cause although historically it has been one of the more influential indicators? House prices grew by 0.6% in August which is even better than the 0.5% in July culminating in the 5.6% annual increase to the end of August. This is the single largest monthly gain since March, a time which was dominated by a forthcoming stamp duty increase. So, should we take any notice of the Nationwide index?
Talking ourselves into a downturn
While there is no doubt that the Brexit vote has caused some confusion and concern in investment markets, what has really changed since the vote? Initially there was a downturn in confidence but this week we saw a significant rebound in the leading business activity indicators. This would seem to suggest that pessimism surrounding the ongoing negotiations to remove the UK from the European Union is over hyped?
Let’s not forget that the European economy, excluding the UK, is still in dire straits and there is little hope of a significant upturn in the short term. We may see a reduction in UK economic growth while the repercussions of the European Union exit vote are negotiated but surely there are more reasons to be cheerful in the longer term. It is very easy to take a negative stance when faced with potentially difficult challenges in the future. There is nothing wrong in being sceptical and perhaps holding back further investment. However, are we now in danger of talking ourselves into a downturn “because we know it is coming”?
Can we expect short-term pain but long-term gain?
Even the most sceptical of analysts admit that while 2017 could be a “tricky” year for the UK property market it should start to rebound by the end of 2017/early 2018. This would see the UK in the full throes of negotiating an exit from the European Union at a time when the European economy perhaps needs the UK more than the UK needs the European economy?
The issue of immigration is never far from the headlines and while there are many different opinions and angles to consider, could this be the red line that the UK will never cross? At the moment the UK government seems to be playing hardball with regards to freedom of movement between the UK and the EU. This is what many UK voters wanted to hear, controlled immigration, and this is now a major issue across the whole of Europe.
Conclusion
Isn’t it amusing that so many analysts who placed great faith in the Nationwide House Price Index in years gone by now prefer to ignore the data when it does not suit their argument? It may be that the index is lagging behind those showing a slowdown in the UK property market or perhaps the market is rebounding quicker and stronger than many had expected?
Whatever the real situation, there is a strong argument that we are in danger of talking ourselves into a downturn. A situation we have been in many times before with the negative UK press at the heart of many scare stories.