House prices in the UK continue to rise, albeit at a slower pace, with property prices surging ahead in London, the East of England, the Midlands and the South.
House prices in the UK went up on average by 0.5% between December 2016 and January 2017 and by 6.2% over the year, with the average property now valued at £218,255 – that’s £13,000 more than a year ago, according to the latest Land Registry’s UK House Price Index (UK HPI) for January 2017.
However, it revised down its figure for annual growth for December 2016 – which was originally 7.2% – to 5.7%. It also pointed out that January’s increase is below last year’s average of 7.4%.
Like last month, the UK HPI’s January data was a little stronger in England, with annual property growth of 6.5%, taking the average property value in England to £234,794. Monthly house prices in England have risen by 0.7% since December 2016.
Meanwhile, properties in Wales went up by a more meagre 4.2%, pricing the average property at £145,933. Monthly house prices dropped by 0.6% since December 2016.
London properties continued their upward surge, with an annual price increase of 7.3% and the average home selling for £490,718 – that’s up by 3% since December 2016.
But it is homeowners in the East of England who continue to experience the biggest property price hikes – up by 9.4% over the year. This compares with just 2.2% annual growth in the North East.
“Take monthly volatility with a pinch of salt”
Commenting on the UK HPI, Rob Weaver, director of investments at crowdfunding platform Property Partner, says: “London property prices surged ahead in January with 3% growth, but you need to take monthly volatility with a pinch of salt. December is always a quiet month for the housing market and usually rebounds in the new year.
“Owners of flats in the capital, though, have fared the best with annual prices rising faster than houses – the average London apartment now costs more than £436,000, which is almost twice the price of a detached house in Wales.
“The South East and South West have also experienced strong price growth of 2.4% and 1.9% respectively between Christmas and the first few weeks of 2017.
“But increasingly it appears the North-South divide has returned. The North East, in particular, is dragging behind the rest of the country, even suffering a fall in property prices alongside Yorkshire and The Humber in January,” Mr Weaver says.
“Despite political turmoil, higher stamp duty bills and tighter lending criteria, the housing market is proving remarkably resilient and robust. The critical shortage of suitable property for sale in many parts of the country combined with record low interest rates fuelling demand means price growth looks set to continue.”
Richard Snook, senior economist at PwC, adds: “We expect house price growth for 2017 to be between 2% and 5%, which means a further slowing of prices over the next 12 months.
“The regional data, which can be volatile when viewed as a single month, shows the strongest performance was in London. Average prices jumped from £477,000 in December to £491,000 in January. The South East and East Anglia are also among the strongest regions with annual growth of 8.7% and 9.4% respectively."
Boost to Midlands house prices
Rightmove’s House Price Index, which looks at the prices of property coming on to the market rather than prices paid, reported that prices had gone up on average by 1.3%, or £3,877 between February and March 2017 – the highest average monthly rise at this time of the year since 2007. However, annual growth has slowed to 2.3%, compared to 7.6% in March 2016.
Homeowners in the East and West Midlands were the winners when it comes to capital gains, with both areas up by 2.1% over the month, and annual growth of 4.2% in the West Midlands and 5.7% in the East Midlands.
Miles Shipside, Rightmove director, says: “The price-rise crown has shifted from its previous strongholds. The pace is no longer being set by the more affluent commuter-belt South, including London with its international appeal. Neither is it set by the cheaper North driven by a mass of investors swooping on high buy-to-let yields. As markets in other areas of the country become more mature and run out of price-rise steam and froth, the fundamentals of the Midlands have come to the fore.
“Accessibly and conveniently located in the middle of the country, the area offers mid-range and relatively affordable prices at an average of around £200,000, while also exhibiting local economic breadth and strength. As other parts of the country suffer from varied factors such as highly stretched affordability, changes in sentiment and increased economic uncertainty, it is the Mighty Midlands that is the current powerhouse of price rises.”
Russell Quirk, chief executive of eMoov, is more pragmatic about Rightmove’s data, saying: “Depite Rightmove's best intentions to deliver transparent market analysis, the nature of their data being based on asking price and not sold price means it should only be viewed as a tentative toe dip into the state of the UK market at present.
“The reality is that in areas like the Midlands where prices aren't as inflated, a more no-nonsense approach is benefiting homeowners as they proceed with their sale and see stronger, more natural price growth across the board as a result."
Notes: The UK House Price Index uses sales data from the Land Registry, Registers of Scotland and Land and Property Services Northern Ireland. Halifax and Nationwide indices are based on customer mortgage valuations
Low supply pushes up prices
In its latest report, Halifax reveals that house prices in the three months to February were 5.1% higher than in the same period a year ago, but were down from 5.7% annual growth in January, the lowest figure since July 2013. This puts the average UK house price at £219,949.
Martin Ellis, Halifax housing economist, says: “Housing demand is being supported by an economy that continues to perform well with employment still expanding. Meanwhile, the supply of both new homes and existing properties available for sale remains low. This combination is pushing up prices.
“The annual rate of house price growth has, however, nearly halved over the past 11 months. A sustained period of house price growth in excess of pay rises has made it increasingly difficult for many to purchase a home. This development, together with signs of reduced momentum in the jobs market and squeezed consumer spending power, is expected to curb house price growth during 2017.”
Alex Gosling, chief executive of online agent HouseSimple.com, comments: “Although house price growth is showing signs of slowing, we are comparing growth at the start of this year with the same period last year when the impending stamp duty changes had a profound impact on the market.
"Actually, 2017 has seen a steady if unspectacular start, with activity in the market at levels we would expect to see in a normal year, which 2016 wasn't.
"Demand hasn't fallen away despite uncertainty around Article 50, although buyers are taking their time looking before committing to a purchase. And the continued supply shortage is still playing a significant role in price stability.
"The general consensus is that price growth will be low digits in 2017, but the critical spring market often sets the tone for the rest of the year. Early indicators suggest that we could see a healthy spring as buyers are starting to make offers rather than simply window shopping, and stock levels are creeping up.”
Outlook is “uncertain”
Nationwide’s data for February 2017 reported annual house price growth of 4.5% and a monthly rise of 0.6%. This put the average UK house at £205,846 ¬ up by £606 from January.
Robert Gardner, Nationwide's Chief Economist, says: “The outlook is uncertain, but we expect the UK economy to slow through 2017 as heightened uncertainty weighs on business investment and hiring. Consumer spending, a key engine of growth in recent quarters, is also likely to be impacted by rising inflation in the months ahead as a result of the weaker pound.
Like last month, Mr Gardner continues to predict “a small rise in house prices of around 2%” during 2017.
Jonathan Hopper, managing director of Garrington Property Finders, comments: “It’s fast becoming less a battle of wills than a battle of nerves – the uneasy stand-off between cautious buyers and sellers who know they have less competition than usual.
“The acute lack of supply is steadily nudging up average prices, but pragmatic vendors have long since grasped that this is anything but a seller’s market.
“Instead, buyers frequently hold the whip hand, bolstered by resilient levels of confidence and sound economic fundamentals; GDP is still growing well, there are record levels of employment and interest rates are barely above their historic lows.
“The result is that despite the continued rise in average asking prices, astute buyers are increasingly able to ask for, and secure, sizeable discounts.
“The steadily improving picture painted by February’s index is likely to set the tone for the year ahead. On this evidence, we expect to see further price rises, but at a more subdued pace as house price to earnings ratios begin to bite in many parts of the country and constrain price growth.”