Britain’s house prices fell in annual terms for the first time since 2012 in June as the country reeled from the coronavirus shock to the economy, mortgage lender Nationwide said on Wednesday.

Nationwide said its measure of house prices fell by 0.1% compared with June of last year. In monthly terms, prices fell by 1.4%, not as steep as May’s 1.7% fall, which was the biggest drop in more than 11 years.

A Reuters poll of economists had pointed to an annual rise of 1.0% and a monthly fall of 0.7%.

The government eased restrictions on the housing market in mid-May but data published by the Bank of England (BoE) earlier this week showed the lowest number of mortgage approvals on record during that month.

Nationwide’s chief economist, Robert Gardner, said a further easing of broader lockdown measures in the coming weeks was likely to lead to a slight pick-up in activity in the housing market, but the medium-term outlook remained highly uncertain.

“The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy,” he said.

Nationwide said on a seasonally adjusted basis, house prices in June were 3.2% lower than in April.

It said its sample sizes had remained sufficiently large to generate an accurate reading of price changes.

In London, house prices rose by an annual 2.1% over the second quarter and average prices in the capital were just 3% below all-time highs struck in early 2017.

A Reuters poll of property market analysts published last week showed prices in London were expected to fall 5.0% this year before rising 2.0% next year and 4.3% in 2022.

Meanwhile, the historic collapse in British manufacturing caused by the coronavirus lockdown abated in June as companies reported a small increase in output, a survey showed on Wednesday.

The IHS Markit/CIPS UK manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 from 40.7 in May, unrevised from a preliminary reading and creeping back above the 50 line that signifies growth for the first time since February.

“Output edged higher and domestic demand firmed as lockdown restrictions loosened, factories restarted and staff returned to work,” said Rob Dobson, director at IHS Markit, which compiles the survey.

“The planned loosening in COVID-19 restrictions on July 4 should aid further gains in coming months.”

The survey is designed only to show the magnitude of monthly changes in output across businesses. The return to a reading above 50 does not signify a recovery to normal levels of manufacturing output.

In June, the Bank of England said Britain’s economy looked on course to have shrunk by around 20% in the first six months of 2020 -- a smaller decline than it had first feared, but still one of the biggest annual drops in 300 years.

Manufacturers are nevertheless looking forward to better days.

Optimism hit a 21-month high in June, Dobson said.

Prices in shops in Britain fell again in June as retailers tried to lure shoppers out of their coronavirus caution but the size of the drop was smaller than in May, an industry survey showed on Wednesday.

Shop prices fell by 1.6% in annual terms, following a 2.4% drop in May which was the biggest decline since at least 2006, said the British Retail Consortium trade body and market research firm Nielsen.

Food inflation held steady at 1.5% but non-food prices dropped by 3.4%.

“Consumers have benefited as shop prices have fallen for the 13th consecutive month. However, the situation for many retailers, such as those in clothing and footwear, remains very challenging,” Helen Dickinson, the BRC’s chief executive, said. Britain’s most closely watched inflation rate fell to 0.5% in May, its lowest in nearly four years. Bank of England Deputy Governor Ben Broadbent has said it could go below zero in the coming months.

Seperately, Sterling will gain towards the end of the year if Britain and the European Union (EU) thrash out a deal over future trade relations as most analysts expect, a Reuters poll found.

But London and Brussels remain far apart in negotiations, and the risk of a no-deal Brexit at the end of 2020 remains firmly on the table, analysts also say.

Reuters