Blog News

Average UK property price up to £200,000, latest index shows

by International Commercial Investment on January 1, 2016

Source: Propertywire

Property prices in the UK increased by 0.8% month on month in December to an average of £196,999 and up 4.5% year on year, according to the latest monthly index to be published.

The data from home lender, the Nationwide, shows that after moderating during the first six months of 2015, house price growth has remained in a narrow range between 3% and 4.5% in the second half of the year.

All regions except Scotland saw increases in house prices in 2015, though all recorded slower rates of annual price growth than in 2014. London was the strongest performing region for the fifth year running, with average prices up 12% year on year.

The Nationwide’s quarterly index, however, shows that average prices in London are now 50% above their pre-crisis peak in 2007, while in the UK overall prices are around 7% higher. The neighbouring Outer Metropolitan region took second place, with prices up almost 11% compared with the fourth quarter of 2014.

Yorkshire and Humberside was the weakest performing English region, with prices up 0.4% year on year. House prices continue to recover in Northern Ireland, with annual growth of 6.5% in the fourth quarter, although average prices are still 44% below their pre-crisis peak.

Wales saw a 0.7% year on year increase in average prices, similar to the 1.4% increase recorded in 2014. Scotland was the only region to see prices fall over the year, with prices down 1.9% compared with the fourth quarter of 2014.

The full data also suggests that in England the North/South divide has widened further. Average house prices in England increased by 2.2% in the fourth quarter and were up 6.9% year on year. Price growth in the South exceeded that in the North for the 27th consecutive quarter.

Prices in Southern England, that is the South West, Outer South East, Outer Metropolitan, London and East Anglia, were up 8.9% year on year, whilst in the West Midlands, East Midlands, Yorkshire & Humberside, North West and North prices rose by just 1.6%.

In cash terms, the gap in average prices between the South and the North of England widened further and now stands at nearly £159,000, around £23,000 higher than a year ago.

Looking ahead to 2016, the risks are skewed towards a modest acceleration in house price growth, at least at the national level, despite the likelihood of interest rate increases from the middle of next year, according to Robert Gardner, Nationwide’s chief economist.

‘Further healthy gains in employment and rising wages are likely to bolster buyer sentiment, while borrowing costs are expected to rise only gradually. However, the main concern is that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability,’ he said.

‘Overall, we expect UK house prices to rise by 3% to 6% over the next 12 months. It remains an open question whether the striking divergence in regional house price performance evident in recent years will be maintained in 2016,’ he added.

He pointed out that prices in the South of England, and especially in London, have been outpacing the rest of the UK by a wide margin. Indeed, prices in the South of England are now well above their pre-crisis levels while they remain below in Scotland, Wales and large parts of the North of England.

Gardner also pointed out that there are few signs of regional convergence and regional house price performance was mixed again in the fourth quarter of 2015. Five UK regions recorded a slowdown in the annual rate of growth, while seven saw acceleration. Most parts of the country continued to see annual house price gains, however, the exception was Scotland which recorded a small decline.

‘The pattern of regional price growth in the fourth is largely a continuation of the trends prevailing over the past two years, where the pace of price growth generally moderates as you move from the South to the North of the country,’ said Gardner.

‘A large part of the difference is likely to relate to variations in labour market conditions. Indeed, there is a strong relationship between employment growth since the financial crisis and the rate of house price growth, as shown below,’ he explained.

‘Regions with higher rates of employment growth have seen significantly stronger rates of house price appreciation. The gain in employment in London is particularly striking, with the number of people in employment up 14% compared to the pre-crisis period,’ he added.

According to Mark Posniak, managing director of Dragonfly Property Finance, this relatively strong end to the year for UK property prices is likely to set the tone for 2016 as a whole. ‘The seemingly eternal imbalance between supply and demand will almost certainly keep house prices rising next year, if only at a moderate pace,’ he said.

Although London led growth in 2015, he believes that the affordability issue will act as a drag on demand throughout 2016, and other regions may well outperform it next year. ‘Overall, the jobs market is solid, people are confident and mortgage finance is cheap and this will continue to drive demand for property. As the December report shows, there is a strong correlation between job numbers and house price growth. If your local jobs market is strong, the likelihood is that its property market will be, too,’ he added.

International Commercial InvestmentAverage UK property price up to £200,000, latest index shows