The latest House Price Index from the Office for National Statistics (ONS) and Land Registry shows that annual house price growth stood at an average of 5.2% in December, which is up from 5.0% in November last year.
The annual rate of growth has slowed since mid-2016, but remained broadly around 5% in 2017.
The average UK house price was £227,000 in December. This is £12,000 higher than in December 2016 and £1,000 higher than in the previous month.
The main contributor to the increase in UK house prices in December was England, where the average property value rose by 5.0%, to £244,000. Wales saw the average house price increase by 5.4% over the year, taking it to £154,000. In Scotland, the average rate of growth stood at 7.7% in December, bringing house prices to £149,000. The average house price in Northern Ireland stood at £130,000 in the fourth quarter (Q4) of 2017, following a 4.3% increase.
On a regional basis, London continued to host the highest average house price, at £484,000, followed by the South East and East of England, at £322,000 and £290,000 respectively. The lowest average house price was still seen in the North East, at £131,000.
The South West recorded the highest annual house price growth in December, with a 7.5% average increase. This was followed by the East Midlands and West Midlands (both at 6.3%). The lowest annual growth rate was seen in London, where prices rose by an average of 2.5% over the year, followed by Yorkshire and the Humber, at 2.8%.
The local authority showing the largest annual growth in the year to December 2017 was the Orkney Islands, where prices rose by 18.2%, to reach an average of £147,000. The lowest annual growth was recorded in Kensington and Chelsea, where prices dropped by 10.7%, taking the average value to £1,212,000.
Annual House Price Growth at 5.2% in December, Reports ONS
Low numbers of sales transactions in some local authorities and London boroughs, such as the Orkney Islands and City of London, can lead to volatility in the series. While efforts are made to account for this, the change in price in these local levels can be influenced by type and number of properties sold in any given period.
In December, the most expensive borough to purchase a property was Kensington and Chelsea, where the average house price was £1.2m. In contrast, the cheapest area to buy was Burnley, at just £78,000.
Richard Snook, the Senior Economist at PwC, comments on the data: “Today’s figures complete the ONS and Land Registry figures for 2017, and show house price inflation edged up to 5.2% in the year to December, from 5.0% in November, taking the price of a typical UK house to £226,760.
“This reveals a full year house price increase of 4.8% across the UK, marginally above our projection of around 4%, released at the beginning of the year.
“It also shows that house price growth has outpaced average earnings growth for the fifth consecutive year, further ratcheting up the affordability challenge. Cumulatively, house prices have increased by 22% more than earnings between 2012 and 2017.
“In terms of regional trends, London prices showed a slight recovery from the sharp fall in November, so the picture is one of a market that has plateaued since the summer. London prices are just 2.5% above their level a year ago. This effect appears to be spreading to the next most expensive regions, the South East and the East, where prices have been flat since July.”
The CEO and Founder of online mortgage broker Trussle, Ishaan Malhi, also says: “By the end of 2017, the average house cost £12,000 more than it did in December 2016. The shortage of homes for sale has kept the property market competitive.
“If you’re looking to buy in the coming months, it’s worth keeping an eye on the mortgage market. The cost of borrowing is expected to rise, as certain bank subsidies fade away and interest rates climb. In such an environment, locking in a competitive five-year fixed deal will keep your repayments stable for the next few years, while the country comes to terms with an increasingly uncertain economic future.”
Russell Quirk, the Founder and CEO of online estate agent Emoov.co.uk, gives his thoughts on the figures: “Another marginal drop in buyer enquiries, coupled with a continued shortage of new properties coming onto the market, has seen transaction levels continue to dwindle. However, it highlights the severe shortage of stock to satisfy even the most paltry of buyer interest, as prices remain stimulated by the imbalance of supply and demand levels in the market.
“While London continues to see annual house prices growth slump, there are a wealth of areas that have enjoyed double-digit growth, with the Orkney Islands not only leading the UK, but Scotland, as the region with highest annual price growth.
“Despite sitting at the more unaffordable end of the market, Cambridge has seen the second strongest annual price growth in the UK.
“The diversity of the fabric that constructs our overall market is clear to see, with areas across the nation from Eden to Edinburgh, West Dunbartonshire to West Dorset, Manchester to Chichester, and much more all enjoying double-digit price growth over the last year.”
The Managing Director of buy-to-let specialist Sequre Property Investment, Graham Davidson, offers his opinion: “Ending the year on a high, the increase of 5.2% only further cements why people should still be pouring into buy-to-let in 2018. A volatile stock market will push even more people to invest in property and, despite changes to the tax law, buy-to-let is still producing high income. This simply reinforces its position as the number one investment choice.
“Location is an important consideration for investors looking to maximise their profit, and the likes of Manchester and Liverpool are still the key cities for investment. A 5.9% growth in the North West is an impressive amount of capital growth and, with strong tenant demand and high rental yields, it has long remained the place to be for buy-to-let. London’s downfall has only boosted the profile of the North West, something which we predict will continue for the long term.”
John Eastgate, the Sales and Marketing Director of OneSavings Bank, continues: “Today’s surprisingly robust figures will not be welcomed by those looking to get a foothold on the housing ladder. The absence of wage inflation means that affordability continues to get tougher and, with many forecasting an interest rate increase in May, the resultant increase in mortgage rates will be a further barrier. It would be fair to expect house price inflation to soften through the year.”