UK House Prices Flash : Can’t hear the hissing yet…

Analyst – Simon French +44 (0)20 7886 2753

At my fifth birthday party there was a ban on balloons. The reason? My girlfriend was scared of the possibility of them exploding. Governments and Central Bankers have a similar fear to that experienced by my five year old belle – unfortunately they also possess a poor track record of being able to orderly deflate asset bubbles.

This morning’s UK house price data from the Halifax, showing an accelerating rate of increase (up to 10.2% YOY in July, up from 8.8% YOY in June) will be concerning for the Bank of England that has recently guided the market that their next move on monetary and prudential policy will be “led by the data”.

However, we believe the Halifax data is lagging a market which has begun to moderate with other indicators that showed consistent softening in Q2 which we believe goes beyond the Mortgage Market Review. We hold our view for the first UK interest rate rise in February 2015 and for house price inflation falling back to the 3% – 6% range by the end of 2014 but still underpinned by strong price supporting factors – low taxation, high immigration and constrained housing stock growth.


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