UK Inflation & House Price Index – PwC comments

Commenting on the UK House Price Index out today, Richard Snook, senior economist at PwC, said:

House price growth continues unabated

“Today’s official housing release from the ONS and Land Registry showed that average UK house prices grew by 7.7% in the year to September, unchanged from August.

“We now have three months of post-Brexit official housing figures, which show price growth remaining robust, but fewer properties changing hands.

At the start of the year, we expected slower house price growth, but in fact it has shown impressive resilience: in the first three quarters of the year average annual house prices were up by around 8% across the UK compared to the same period last year.

“But high prices are causing some buyers to stay out of the market altogether. The ONS data show residential transactions in September were just 93,000, 11.3% lower than the previous year.

This implies that underlying demand may be weakening as property becomes less and less affordable.”

Commenting on the latest UK inflation figures, Andrew Sentance, senior economic adviser at PwC, said:

“UK inflation fell back slightly in October to 0.9% – which was a surprise to market expectations of a further increase due to the weakness of sterling. Food prices fell compared with last month, and this offset rises elsewhere, including higher fuel prices.

Though the pound has fallen very sharply, it is taking some time for this to feed through into prices in the shops and online.

“But this respite for consumers will be short-lived. In the months ahead and next year, we should still see a significant increase in inflation reflecting higher import costs for manufacturers and retailers.

The latest PwC projections – published today – suggest that CPI inflation should be between 2.5 and 3% by the end of next year, much in line with the Bank of England’s latest forecast.

“This will squeeze the growth of consumer spending and reinforce the projected slowdown in economic growth next year arising from the uncertainty created by the EU referendum vote.”

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