House Price Growth at Lowest Level since 2013, Reports ONS

Average annual house price growth was at the lowest level since 2013 in June, according to the latest official House Price Index from the Office for National Statistics (ONS).

The average house price in the UK rose by 3% in the year to June 2018, which is down from 3.5% in May 2018. This is the lowest annual rate of growth since August 2013, when it was also 3%. Annual house price growth has slowed since mid-2016 and has remained under 5% – with the exception of October 2017 – throughout 2017 and into 2018.

This slowdown in UK house price growth over the past two years has been driven mainly by a slowdown in the south and east of England. The lowest annual rate of growth was seen in London in June, where prices dropped by an average of 0.7% over the year, down from -0.2%.

In June, the average UK house price was £228,000. This is £6,000 higher than in June last year and £1,000 higher than May 2018. On a seasonally adjusted basis, the average house price in the UK was unchanged between May and June this year, compared with an increase of 0.5% during the same period of 2017.

By property type

Across the UK, all houses showed a rise in average price in June when compared to the same month last year. Semi-detached houses recorded the greatest increase, at an average of 4.4% in the 12 months to June, to £216,000.

The average price of a flat or maisonette grew by 0.5% in the year to June, to £204,000 – the lowest annual growth of all property types. Weaker growth in UK flats and maisonettes was driven by decreases in the value of this type of property in London. The capital accounts for around 25% of all UK flat and maisonette transactions.

By country 

The main contributor to the increase in UK house prices during June came from England, where the average property value rose by 2.7%, to £245,000. Wales saw house prices increase by an average of 4.3% in the 12 months to June, to stand at £157,000.

In Scotland, the average property value grew by 4.8% over the same period, to £150,000. And the average price in Northern Ireland currently stands at £133,000, following a 4.4% increase

House Price Growth at Lowest Level since 2013, Reports ONS

over the year to the second quarter (Q2).

By region

On a regional basis, London continued to be the region with the highest average house price in June, at £477,000, followed by the South East and East of England, which stood at £325,000 and £293,000 respectively.

The lowest average price continued to be found in the North East, at £127,000.

The West Midlands recorded the highest annual growth in June, at an average of 5.8%. This was followed by the East Midlands (4.1%).

The lowest annual growth was seen in London, where the average price dropped by 0.7% over the year. This is the lowest annual growth rate for the capital since September 2009, when it was –3.2%. London has shown a general slowdown in its annual growth rate since mid-2016. The second lowest annual growth was in the North West, where prices fell by 0.6% in the 12 months to June.

A recent report from home.co.uk claims that a slowdown in certain UK regions is now spreading to other parts of the country.

Comments 

Lee James Pendleton, the Founder Director of independent estate agent James Pendleton, responds to the ONS data: “This is the fifth consecutive month that London house prices have fallen over the year. The capital has dropped from its knees onto its back, but, with every stumble, new blood is coming into the market.

“After a rate rise, however, all eyes are on anything that hints at excessive borrowing and a country addicted to easy money.”

The Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Kate Davies, also comments: “Government policy aimed at recalibrating the balance between the buy-to-let sector and the ability of first time buyers to access the property market has – as intended – put pressure on the buy-to-let sector. This has, in turn, led to a falling off of investment in the sector, which directly correlates with private rental prices in the UK.

“This is confirmed by reports last week by the Royal Institution of Chartered Surveyors (RICS) of a drop in landlords advertising rental properties to let. This is unsurprising, given landlords are weighing up their options in light of their loss of tax relief, which has put pressure on their finances.

“The true impact of these policy changes is still rippling through the system. However, the end result seems clear: decreased investment into the buy-to-let sector by landlords reduces supply, which, in turn, will increase the upwards pressure on rental prices. Unfortunately, it will be those who are currently renting, or seeking suitable properties to rent, who will bear the brunt of the increases.

“More needs to be done to protect and foster the rental sector, especially as homeownership has become unattainable for many. The Green Paper published on Tuesday by the MHCLG [Ministry for Housing, Communities and Local Government] underlines the urgent need for more properties to be made available in the public rented sector: we welcome this – any increase in the number of properties available for sale or rent will help ease the pressure on the private rented sector and the stock or properties available for purchase.  The Government made clear its intentions in last year’s White Paper (Fixing our Broken Housing Market): it is vital that the momentum is maintained so that real results can be delivered.

“Mortgage lenders will continue to underpin the private rented sector by supporting buy-to-let borrowers as best they can, but we need the Government to recognise that putting further financial pressures on landlords will inevitably impact those who are renting.”

Shaun Church, the Director of mortgage broker Private Finance, adds: “A slight correction in house prices is no bad thing for the UK property market. Years of steady house price hikes have created huge affordability issues for first time buyers, so the fact that annual house price growth has fallen to its lowest point in five years will be a welcome change for many. The trend has been reversed completely in the capital and, with negative price growth also seen in the North East, it could be that other regions will see a more relaxed pace of house price rises in the coming months.

“House prices are still rising faster than wages and, until the two are more evenly matched, affordability issues will continue to impact homeownership levels. The good news for buyers is that mortgage rates continue to be very affordable – though with interest rates on the up, it may be wise to lock into low rates sooner rather than later.”