Houses Go Up But Cars Go Down
UK house prices bounced smartly in June, according to a closely watched index, although evidence of pinched household spending was evident in the drop in new car registrations.
According to the Halifax House Price Index, average prices rose by 1.2 per cent in June, in contrast with another similar index conducted by lender Nationwide, which showed prices flat on the month.
Over the three months to June, house prices stood 0.5 per cent below levels of the previous quarter and was the smallest quarterly fall since the second quarter of 2010.
On a three-month measure, house prices in June are now 3.5 per cent below their levels of one year earlier.
Separately, the Society of Motor Manufacturers and Traders said that new car registrations in June had been 6.2 per cent below levels the year before. However, the rate of decline for the month was slower than the 7.2 per cent rate for the first half of the year overall. Car registrations in 2010 were bolstered by the tail-end of the car scrappage scheme, as households rushed to take advantage of incentives to turn in older, less fuel-efficient models.
But the SMMT data point to strains on household budgets. Private car registrations are down by 13.8 per cent in June, the first month in which the data for the same period last year was not flattered by the tail effects of the scrappage scheme.
The decline suggests that without a boost from taxpayers, households do not feel sufficiently confident about finances to buy a new car.
Howard Archer, economist at IHS Global Insight, said: “Significantly and unsurprisingly, private car sales were again weak in June. This reflects the serious pressure that households are under, most notably the major squeeze on their purchasing power coming from high inflation, muted wage growth and the increased fiscal squeeze.“
Even low interest rates, which appear to be making houses more affordable than they might otherwise be, appear to be having little effect on big-ticket purchases like cars. Martin Ellis, housing economist at Halifax, said that low rates and a rise in the number of employed are supporting demand.
However, he warned that “significant headwinds” in the form of low earnings growth, higher taxes and relatively high inflation are likely to put pressure on household finances and constrain housing demand.
Thanks to the Financial Times for this information. Read the full article HERE
