UK Nationwide House Prices Fall In May

(RTTNews) - UK house prices declined for the first time this year amid high uncertainty over the developments in the Middle East and its impact on inflation and market interest rates, data from Nationwide Building Society showed Monday.

House prices dropped 0.6 percent month-on-month in May, in contrast to the 0.4 percent rise in the prior month. This was the first monthly drop so far this year and also came in weaker than forecast of 0.1 percent fall.

On a yearly basis, house price growth eased notably to 1.7 percent from 3.0 percent in the previous month.

"Given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates, some loss of momentum was to be expected," Nationwide's Chief Economist Robert Gardner said.

Gardner noted that measures of housing market sentiment also deteriorated. Economic growth is forecast to be somewhat weaker and inflation higher than previously projected due to the war in the Middle East. That said, the impact will ultimately depend on the duration of the shock and the policy response, he observed. Despite the rise in market interest rates, the impact on housing affordability has so far been moderate, Gardner said.

There is some confidence that, if the latest shock passes relatively quickly, and energy prices normalize in the quarters ahead, any near-term softening in the housing market will also prove short lived, said Gardner.