London Continues to Bring UK House Price Growth Down

Average UK house price growth stood at 4.4% in the year to February 2018, down from 4.7% in January, according to the most recent House Price Index from the Office for National Statistics (ONS) and Land Registry. This fall in the rate of growth is mainly driven by a decline in London.

Annual house price growth has slowed since mid-2016, but has remained generally under 5% throughout 2017 and into 2018. On a monthly basis, the average UK house price dropped by 0.1% in February.

The average property value in London declined by 1% in the year to February, down from the 1.3% increase recorded in the previous month.

In February, the average UK house price was £225,000. This is £9,000 higher than in the same month last year and broadly unchanged from January 2018.

The main contributor to the increase in UK house prices in February was England, where the average property value rose by 4.1% over the previous 12 months, with the typical house price now standing at £242,000. Wales experienced growth of 4.8% over the past year, taking the average value to £153,000. In Scotland, the average house price increased by 6.2% over the 12 months to February, to reach £144,000. The average property value in Northern Ireland currently stands at £130,000, following a rise of 4.3% over the year to the fourth quarter (Q4) of 2017.

Regionally, London continued to hold the top spot for the highest average house price, at £472,000, followed by the South East and East of England, at £322,000 and £288,000 respectively. The lowest average value continued to be found in the North East, at £128,000.

The West Midlands recorded the highest annual house price growth in February, at an average of 7.3%. This was followed by the East Midlands (6.3%).

The lowest annual growth was seen in London, where prices dropped by 1% over the year to February. This is the lowest annual rate of growth for London since September 2009, when it was down by 3.2%. London has shown a general slowdown in its annual growth rate since mid-2016. The second lowest annual increase was recorded in Yorkshire and the Humber, where prices rose by an average of 3.1% in the 12 months to February.

Comments

Jeff Knight, the Director of Marketing at Foundation Home Loans, says: “The first quarter of the year has experienced a fall in buyer demand and some anecdotal evidence suggesting mortgage softening, mainly due to unfeasible asking prices, which – even with record low interest rates – have been rising at a pace faster than earnings, particularly marginalising younger property hunters looking to get into the ownership and rental market.”

“That said, activity is expected to gather pace in Q2 and we face the age-old issue of demand vs. supply. It’s paramount we make this a year of action; that the plans to meet the influx of demand are seen through and we can solve the supply issue once and for all.”

The Chief Executive of financial planner Foresters Friendly Society, Paul Osborn, also comments: “House prices across the UK are at historic highs, preventing first time buyers from getting onto the ladder and proving tough times for sellers too. But this shouldn’t put people off saving. Whether considering a doer-upper or a stop-gap on the road to that dream property, ensuring your finances are working to their full potential is key.

“Starting the saving process early can often feel like an uphill battle, particularly when the cost of living seems so high. However, using specifically designed products can make a real difference. For example, the Lifetime ISA (LISA) offers those under 40-years-old a very welcome 25% boost to annual saving. By identifying savings goals and using the appropriate product, that dream of getting on the housing ladder can be brought much closer.”

Ishaan Malhi, the CEO and Founder of online mortgage broker Trussle, gives his thoughts on the figures: “The slowdown in house price growth across many areas of the UK is no doubt offering some relief to anyone gearing up to buy their first home. We’re also finally beginning to see wages pick up pace, which should be a confidence booster for first time buyers. This group also needs to bear in mind, though, that there’s a possibility we’ll see two interest rate rises this year. This will impact how much money a new buyer can borrow and could also increase the cost of their monthly mortgage repayments.

“With this in mind, any hopeful first time buyers should look to lock in a fixed rate mortgage deal as soon as possible. When speaking to a lender or broker, it’s also worth asking what the true cost of each deal is, accounting for any extra charges, such as an arrangement fee. This can make a huge difference. For example, if you were to choose a deal with one of the UK’s big six lenders, and base your decision on true cost rather than the interest rate, you could save almost £400 over two years.”

The Founder and CEO of online estate agent Emoov.co.uk, Russell Quirk, also responds to the data: “It would seem that UK home seller trepidation is still impacting the market to some extent, and the resulting lack of diverse housing stock on the market is ironically subduing buyer demand in the process.

“That said, the slow in market conditions seems to be coming to an end, and other, more current, industry indicators are showing that the market is returning to full health.

“There is still an appetite for homeownership and, as we come to the end of a long tunnel of Brexit uncertainty and political instability, this hunger will only grow larger.

London Continues to Bring UK House Price Growth Down

“Unfortunately, for homeowners in the capital, the tunnel is a little longer than elsewhere and, while homeowners in other regions of the UK are enjoying a return to strong price growth trends, the London market remains slow out of the blocks in 2018.”

Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, has her thoughts: “Everywhere but London is growing in real terms ahead of inflation, but, beware, that’s only because the playing field wasn’t level to begin with.

“The explanation partly lies in the fact that the rest of the country is still getting a shot in the arm that London struggles to benefit from. That medicine, masking any true underlying trends, comes in the form of the Help To Buy scheme that imposes a price cap (£600,000) that feels relatively low across most of the capital.

“For evidence of this, you only need to look at the new build house prices, the only properties eligible for the scheme.

“New builds were up 9.1% annually at the last count, buoyed by this extra competition for those homes that permit access to these Government loans. In other words, the market is struggling where Help to Buy gets no traction and doing well, if not very well, where it does. That’s more than a coincidence.”

An Economist at PwC, Thomas Fisher, adds: “Today’s release from the ONS and Land Registry shows that average house price growth across the UK is softening. House price inflation of 4.4% in the year to February 2018 is down from 4.7% in January (originally reported as 4.9%). Compared to the month before, average prices were broadly flat, at around £225,000.

“Regionally, the picture remains mixed, with London diverging from the rest of the country. Compared to this point last year, prices in London have decreased by 1%, the first time a year-on-year decline in average London prices has occurred since September 2009.

“We broadly expect current market conditions to continue, projecting UK wide house price inflation to be around 4% in 2018.”

Shaun Church, the Director of mortgage broker Private Finance, gives his comments: “The property price slowdown in the capital continues, with February marking the first time London has experienced negative annual house price growth since September 2009. Though a fall of 1% might not seem much to buyers in the area, it is indicative of a wider trend of gradually reduced house price growth that has been in place in London since mid-2016.

“It’s evident that house prices have reached a ceiling in many parts of the capital, and, with the average house price in London still remaining over £470,000, a fall in prices would be a welcome change for many struggling potential buyers. There is still some way to go before London properties can be considered affordable, and, though first time buyers in the region can benefit from the recently introduced Stamp Duty holiday, most will still find themselves paying some tax given the cut-off point for no Stamp Duty is £300,000.

“House prices continue to rise across all other regions of the UK and homeowners will take comfort in the fact that this growth has hovered around the 5% mark for some time, despite significant political and economic uncertainty. With mortgage rates still very competitive, homeowners looking to cash in on the rising value of their home should consider remortgaging to unlock a cheaper deal.”

Sam Mitchell, the CEO of online estate agent HouseSimple.com, says: “These figures are not reflective of market conditions right now, which show strong demand from buyers and stock levels on the rise.

“February and March were difficult months because of the inclement weather, but the market has come to life in the past week.

“We are now in the crucial spring period, and early indicators suggest we are going to see plenty of activity during the remainder of April and May.

“This is certainly the case in the north, in major urban areas such as Liverpool and Manchester, where the first time buyer Stamp Duty boost has had the greatest impact.

“Buyers are showing more urgency to purchase. They are still looking for good value, and savvy sellers will understand the market and price sensibly to get a quick offer.

“Even in the tougher London market, there are plenty of buyers, but they are price sensitive. However, a property priced attractively will still sell within a couple of days.”

John Eastgate, the Sales and Marketing Director of OneSavings Bank, adds: “Affordability remains a key barrier to getting onto the housing ladder, so today’s news of a second consecutive decrease in house price growth will be welcomed by prospective buyers. Coupled with yesterday’s news that mortgage lending for first time buyers increased to its highest February level since 2007 and, with wage growth now outstripping the cost of living, we may see increased buyer confidence and greater housing activity in the coming months.”