Economic data – House prices tip into red after flat May, Halifax; fixed mortgage rates rebound following inflation data; material price inflation falls as brick stocks rise | VP, BBY |

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Economic data

House prices were unchanged between April and May but moved into the first Y/Y decline for over 10 years according to the Halifax Price Index. Prices were unchanged at £286,532, but fell by 1.0% on annualised basis according to the UK’s largest mortgage lender. Price pressure was greatest for house movers, -1.1% Y/Y in May, compared to ongoing marginal inflation for first-time buyers (+0.3%). Existing houses continued to fall in value (annual growth of -1.9%), whereas prices for new build properties are still rising (+2.8%), although at the weakest rate for nearly three years. By property type, all except for detached houses (+0.4%) have registered year-on-year declines. The sharpest drop is for flats (-1.9%), followed by terraced (-1.0%) and semi-detached houses (-0.5%). Regionally, the biggest annualised falls were in South East (-1.6%, to £385,943), South West (-1.4%, £301,079) and London (-1.2%, £536,622). Except for Wales (unchanged at +1.1%, £218,365), all areas of the UK saw growth weaken in May compared to April, with most now recording a low single-digit rate of property price inflation. The West Midlands (+2.7%, £251,137) remains the best performing region. Scotland (£201,596) saw annual growth drop to +1.3% (from +2.2%). In Northern Ireland (average price £187,334) growth was +1.5% over the last year (from +2.7%). The recent rises in mortgage rates (see Rightmove, below) “will inevitably impact confidence in the housing market as both buyers and sellers adjust their expectations, and latest industry figures for both mortgage approvals and completed transactions show demand is cooling. Therefore, further downward pressure on house prices is still expected. One continued source of support to house prices is the labour market. While unemployment has recently ticked up from very low levels, brisk wage growth would over time help to improve housing affordability, if sustained”.

Mortgage rates. The lower-than-expected fall in inflation on 24 May fed through to sharply higher average fixed-rate mortgage rates last week, according to Rightmove’s weekly mortgage tracker. The latest ONS inflation rate declined from 10.1% in March to 8.7% in April, but this was higher than the 8.2% consensus expectations polled by Reuters, while core inflation rose. Five-year fixed rates with a 95% LTV moved upwards first in the  immediate aftermath, from 5.15% to 5.27%, while 90% and 85% LTV rates actually slipped slightly (see below). But there was a bigger catch up in the lower LTV loans in the latest week, to 6 June, amid widely reported withdrawal and repricing by lenders. Now all three of the popular five-year bands are above 5%. However, the UK’s largest property portal has identified a relatively wide spread in rates available in each band, as some lenders try to remain as competitive they can. For example, while the average for 85% products is 5.02%, the best-buy is currently 4.43%, up by only 0.07% compared to last week’s lowest available rate.

Building materials. Construction material price inflation continued to fall sharply in April, while unsold brick stocks rose, according to a wide-ranging range of data in today’s monthly Building materials and components statistics from the Department of Building and Trade . The Y/Y rate for all work fell to +4.7% from +8.7% in March and the peak of +26.8% in June 22. By sector, the rate of change were: new housing, +7.6%; other new work, +3.7% and RMI, +4.8%.

Brick data, closely linked to new housing, showed inventory levels rose by 58% Y/Y (albeit from multi-decade lows) to 454 million, following a 49% Y/Y increase in March). This reflected a 14% reduction in production but a greater, 34%, fall in deliveries. It was the second month that stocks rose above their 10-year average of 395 million (see below). This takes the number of weeks in stock (based on the stock level divided by the rolling 12-month total for deliveries) to 13.7 weeks from 12.0 in March and 22% above the 10-year average of 11.2 weeks. The data also covers a wide range of other materials and imports.

In other news …

Balfour Beatty (BBY) has sold its telecoms unit to Irish infrastructure business Obelisk, for an undisclosed price, ConstructionEnquirer.com (link). The move continues Obelisk’s expansion plans since it was acquired by European giant Constructel Visabeira in 2022. Clients include EE, Cellnex, Cornerstone and Vodafone.

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.