House prices in the UK fall again – priced in gold they are at 1987 levels
The Nationwide are out with their report today on UK home prices, they are now down 2.7% on an annual basis. From the report:
“UK house prices declined for the fourth time in five months in July, with prices falling by 0.7%. This pushed the annual pace of price growth down to -2.6%, from -1.5% in June – the weakest outturn since August 2009.”
“The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy. Data released last week revealed that the UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter. This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter. Indeed, the UK economy has contracted by 1.4% over the past nine months, and is now 4.5 percentage points smaller than it was in Q1 2008.
Yes, they really did just try to finger some of the UK housing dip on that extra bank holiday and some rain.
UK Average house price:
(click for sharper image)
The report continues:
“Against this difficult economic backdrop, it could be argued that UK house prices have shown resilience. While prices are currently 13% below their 2007 peak, this is less than the declines seen in a number of other economies that have experienced similar or more robust economic recoveries (see chart).”
For our mind this just goes to show how much additional downside is left in UK housing. This other chart showing the long-run average of UK house prices to earnings, would also suggest there is a lot of downside left:
Along with the lack of building activity in recent years, a large part of the explanation probably relates to the unexpected strength of the UK labour market. The UK added almost 250,000 jobs in the last seven months for which we have data (a rise of 0.8%), even though economic output fell by more than 1% over that period.
However, this pattern of negative economic growth and steady employment growth cannot be sustained indefinitely. Much will therefore depend on the ability of the UK economy to gain momentum in the quarters ahead if labour market conditions, and therefore demand for homes, are to be adequately supported.
And in terms of gold we’re still hovering around that 1987 price level:
Currently the gold price to house price ratio stands at 158 ounces of gold. Still along way of that 85 ounces of gold we got to in 1980. To get there today would take a gold price of about £1900.
- As house prices fall in the UK for the year in terms of gold house prices are back at 1986 levels
- As UK house prices fall they’re now back to 1986 prices when priced in gold
- House prices fall again making fresh lows – now back to 1986 prices
- UK house prices fall 2.3% for the year: Gold:House ratio now at 151:1
- UK Houses continue to fall – now back to 1987 prices
Link to this article: : http://www.goldmadesimplenews.com/analysis/house-prices-in-the-uk-fall-again-priced-in-gold-they-are-at-1987-levels-7535/