British Pound Falls Despite House Price Survey Beating Estimates
- RICS house price balance came in at 6% in August versus 0% expected and 1% prior
- The British Pound took a hit despite the improved residential market survey outcome
- Reports of dwelling price growth come amid higher CPI and weaker wage growth
See how the British Pound is viewed by the trading community at the DailyFX Sentiment Page.
The British Pound did not take the better-than-expected RICS house price survey too kindly. The Royal Institution of Charted Surveyors reported that the headline price balance edged up to 6 percent in August. This was better than the 0 percent estimate and higher than the 1 percent outcome in July.
What this means is that more respondents reported house prices rising than falling. According to the institution, this survey showed an increasingly diverging picture in key activity metrics across the country. They said that sentiment remains cautious in London while further away from the capital, respondents appear to be more upbeat.
In addition, new sales instructions were mentioned to have stabilized having turned progressively less negative in each of the last three months. It was also the least negative reading since February 2016. However, a shortage of stock still remains acute.
Looking ahead, the survey noted that headline price expectations remain subdued over the near-term. This was mainly due to average readings being held down by London and the South East. Respondents continue to anticipate further rental growth while 61% say that they expect more landlords to exit the market.
When taking into consideration recent inflation and wage growth readings from the UK, perhaps reports of house price growth do not inspire confidence. Rising prices and more or less stable wage growth slowly erodes consumers’ incomes. BoE’s Governor Mark Carney mentioned that lacking wage growth was a reason why the central bank hasn’t yet adjusted interest rates for higher inflation.
Speaking of the Bank of England, their next monetary policy announcement is later today. While the markets are not expecting the BoE to adjust rates, it will be important to tune in on what they mention about inflation and whether or not they may hint on taking action on it.
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