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House prices stall in London, while the North fares better


10-18-2017

 

Published by Hannah Nemeth

House prices stall in London, while the North fares better

This month, the general consensus from property market data is that London house prices are growing at a slower rate than the rest of the country.

This compares with strong annual price growth further north – particularly in the East Midlands and North West. Usually the North-South divide is the reverse – with price growth lagging up north compared with London and the South.

However, all the main indices still report that house prices continue to grow across the UK, with a lack of homes on the market helping to support property prices. Low mortgage rates and healthy employment figures have also benefited house buyers, though household incomes are being squeezed.

Key stats at a glance

  • UK House Price Index for August 2017: House prices up by 5% annually. Average price of a UK property: £225,956. Monthly change: +0.5%.
  • Halifax House Price Index, September 2017: House prices up by 4% annually. Average price of a UK property: £225,109. Monthly change: +0.8%.
  • Nationwide House Price Index, September 2017: House prices up by 2% annually. Average price of a UK property: £210,116. Monthly change: 0.2%.
  • Rightmove House Price Index, October 2017: Asking prices up by 1.4% annually. Average asking price of a UK property: £313,435. Monthly change: 1.1%.




The latest figures from the UK House Price Index (UK HPI) for August show an annual price rise of 5% over the year, which means the average property in the UK costs £225,956.

In England, prices have risen by 5.3%, with a monthly price rise of 0.7%, and an average property priced at £243,520.

In Wales, annual price growth has risen slightly and is now 3.4%, with an average property price of £150,258. House prices have fallen by 0.1% since July.

Regionally, the North West witnessed the largest rise in both annual and monthly property prices – up by 6.5% and 2.3% respectively. The East Midlands, South West and Eastern regions all saw prices go up by 6.4%.

London house prices ‘decline in real terms’

In London, annual house price growth is continuing its downward trend, with a 2.6% rise over the year and a 1% fall since July. The average price in London now stands at £484,362. This is the ninth month in a row where the growth in London house prices has remained below the UK average.

Commenting on the Office for National Statistics (ONS) figures for London, Richard Snook, senior economist at PwC, says: “London remains the weakest performing English region, and the August figures show the average price of a home fell by £5,000 to £484,000. Prices are now just 2.5% higher than they were a year ago. With overall consumer price inflation at 2.7% in August, this means London’s house prices declined in real terms.”

North-south ‘flip’

Halifax reveals that house prices in the three months to September were 4% higher than in the same quarter a year ago. It reports that house prices were up by 0.8% since August, with the average price now £225,109 – the highest on record since Halifax started its index.

Tim Moore, senior economist at IHS Markit, which helps prepare the Halifax HPI, says: “The latest data suggests a slight recovery in UK housing market momentum this summer, but the regional figures are a mixed bag. 

“Regional figures for the third quarter show the North-South divide flipping on its head; annual price growth in London and the South East has slipped well behind northern England, and indeed the Midlands.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds: “Once again, the market has proved its resilience and confounded the doom mongers. Not that there is too much to get excited about with these figures which confirm what we have seen at the coalface recently – that prices are holding up reasonably well where vendors are realistic, partly in response to a continuing shortage of stock.

“Sadly, we are not seeing the hoped-for autumn bounce but a steady market is more than welcome with so much uncertain economic news,” he adds.

London ‘a victim of its own success’

According to Nationwide’s latest data, house price growth continues to slow and was 2% up in September, with an average property price of £210,116. It reports that London is the weakest performing region for the first time since 2005, with houses falling by 0.6% annually.

The East Midlands was the strongest performing region – the first time it has held the top spot since 2002 – with prices up 5.1% over the year.

“London has seen a particularly marked slowdown, with prices falling in annual terms for the first time in eight years, albeit by a modest 0.6%. Consequently, London was the weakest performing region for the first time since 2005,” says Robert Gardner, Nationwide's chief economist.

Jonathan Samuels, chief executive of property lender Octane Capital, says that a correction in London house prices is not necessarily a bad thing.

“The London property market has been the victim of its own extraordinary success. Prices in the capital rose to such a level that a correction was always on the cards. Extreme supply issues within the M25 coupled with always-on demand will mean the London market can only fall so much,” he says. 

"In reality, the ongoing correction will be a positive in the longer term. Even by London standards, prices in some areas of the capital had become frankly absurd.

"For the broader market, low supply, strong employment and low borrowing costs are keeping things ticking along, although high inflation and the possibility of the first rate rise for a decade remain a threat.”

Average asking prices up by £3,432

The asking price of properties coming to market has risen by an average of 1.1% (+£3,432) over the month to October, according to Rightmove, which reports 104,000 newly listed properties on its property portal since September.

Miles Shipside, a director and housing market analyst at Rightmove, says it is a buyer’s market.

“It will be harder for this autumn’s sellers to secure a sale because buyers have more choice, with a 3.1% increase in new seller numbers compared to this time a year ago. In addition, the number of sales agreed was running ahead of 2016 over the summer, but has now fallen back with a 5.9% decrease compared to last September,” he explains.

Rightmove reports that the average time from first advertising on the site to being marked as a sale agreed by an estate agent is 63 days and that properties that attract ‘second steppers’ are the most popular – in particular, those with three or four bedrooms.

It reveals that properties with five bedrooms or more or with four bedrooms in a detached house are taking longest to sell, averaging 76 days. Selling larger properties in London is particularly difficult, taking on average 86 days.

Sales agreed in the South have been 7.9% lower than in October 2016, while in the North they have only dropped by 3%.

METHODOLOGY

Halifax House Price Index – This UK-wide index is based on the house purchase price at the mortgage approval stage. It calculates the annual change as an average for the latest three months compared with the same period a year earlier as it says its figures provide a better picture of the underlying trend compared to a monthly year-on-year number as they smooth out any short-term fluctuations.

Nationwide House Price Index – The data for this index for the whole of the UK is drawn from Nationwide’s house purchase mortgage lending at the post-survey approvals stage.

Rightmove House Price Index – The data is compiled from the asking prices of properties when they first come on to the market via over 13,000 estate agency branches listing on Rightmove.co.uk. The sample includes up to 200,000 homes each month – representing circa 90% of the market.

UK House Price Index – The UK HPI uses house sales data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland and is calculated by the Office of National Statistics.

www.moneywise.co.uk/

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