PwC comments on the latest house price and inflation data

17/02/21

Hannah Audino, PwC economist, comments on today's inflation data:

"Consumer price inflation remained subdued at the start of the year. The headline 12-month CPI rate stood at 0.7% in January, a small rise from 0.6% in December. 

"Prices for furniture, restaurants and hotels, and food saw positive price growth between December 2020 and January 2021. However, these upward contributions were largely offset by lower prices for clothing and footwear. The ONS notes that the proportion of items marked as being on sale was nearly 50% more than in January 2020, reflecting the need for retailers to offload unsold stock due to weak demand over the last year owing to the pandemic. 

"We expect inflation to remain low in the first quarter of the year, and then to pick up towards the Bank of England’s 2% target over the course of the year. Consumers will likely see an increase in the price of things like petrol, utilities and services this year, as global demand for oil picks up and demand recovers for the service sectors most impacted by restrictions, along with the VAT cut for hospitality coming to an end in April. On the other hand, rising unemployment - expected with the end of the furlough scheme in April - will increase spare capacity in the labour market and subdue wage growth, putting downward pressure on prices."

Jamie Durham, PwC economist, comments on the latest UK house price data:

“House price growth continued to accelerate in December 2020, with prices 8.5% higher than December 2019. This growth helped to push up the average UK house price to an all-time high of £252,000, which is nearly £20,000 higher than the year before.

“Despite the impact of COVID-19 on the economy, the housing market remained resilient throughout 2020. Prices grew on average by around 3% over the course of the year, which is broadly in line with the previous year. Strong growth in the second half of 2020 helped to offset the weaker period in April and May when the housing market was effectively closed.

“Price growth over the final few months of the year was supported by a combination of pent-up demand, a shift in preferences towards larger properties with more space, and the stamp duty holiday.

“Looking ahead, assuming the Chancellor does not extend the stamp duty holiday or replace it with something else, the housing market could be slower over the coming months compared to what we have seen recently.

"However, there are still a number of factors that could support price growth in the market. Many people have made considerable contributions to their savings over the past 12 months. This, combined with the continued success of the vaccine rollout and a sustained shift in preferences towards larger properties, could support demand and price growth over the coming months."

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