England and Wales house prices break new record, even as monthly growth falters

House prices in England and Wales increased £16,446 annually to £290,640, a 6% increase on November last year, according to the latest index figures.

But the monthly rate of house price growth fell to 0.6%, slower than the 0.9% monthly uplift seen in October, the data from the Your Move index also shows.

Excluding London and the South East, the annual rate of change drops to 4.4% but the capital is not seeing the strongest growth. While the South East overtook East Anglia as the region with the fastest growth in house prices, London dropped to fourth.

The index also shows that home sales fell 15% in November, with completed sales for the year still 3.4% behind the same point in 2014.

It is predicted that the Stamp Duty 3% surcharge on second homes and buy to let buyers may cause a late winter surge as these kind of buyers hurry to beat the April 2016 deadline for the new higher rate.

Adrian Gill, director of Reeds Rains and Your Move estate agents, pointed out that despite being within grasping distance of the £300,000 mark, it may be a few months yet before average prices reach this symbolic level.

He also pointed out that house prices in the South East have risen by an average of 7.1% this month, with values increasing in every local authority in the area. ‘It appears that the double digit price rises first seen in the prime London market, then the other London boroughs, are now rippling out even further to London’s commuter towns, with house prices in Reading rising by 18.3% and Luton increasing 17.3%,’ he explained.

He believes that the housing market will need a Christmas boost to sales to beat last year’s figures. And the Chancellor’s changes could be the gift required. ‘House prices soared in the five months following Nigel Lawson’s withdrawal of the multiple mortgage tax relief in 1988,’ said Gill.

‘More recently in Scotland, after the Land and Buildings Transaction Tax was announced there was also a surge in the sales of high end properties to beat the deadline. England and Wales may now feel the same forces, as there will be a growth in demand from both first time buyers with extra financial support and buy to let landlords hoping to invest before the tax changes come into force,’ he explained.

‘While the Chancellor has planned to increase the number of houses being built, none of these will be completed in the next few months. As the number of houses on the market is at an historically low level, those rushing for the April deadline will be fighting for a decreasing number of properties. So we could see a spike in both house prices and sales over the normally frosty winter period,’ he added.

He said that this potential surge in demand could be most obvious in places like Salcombe, Devon. The town has the highest percentage of second homes in England. In Salcombe, the average price paid for a home in the last year was £532,000. A second home buyer here would need to find an extra £15,960. With such a significant hurdle after the tax comes into force, anyone who wants to buy a home in the area will be rushing to buy before April 2016.

For London, the maximum price of homes which can be bought with the Help to Buy ISA may not be as beneficial as intended. Currently, the upper limit of £450,000 could only buy the average house in 12 boroughs. Even in these areas, prices are rising annually by an average of 12.5%, so London buyers will have to be quick if they are to make use of schemes like the Help to Buy ISA.

Meanwhile, London’s most expensive boroughs are now showing signs of recovering from the last Stamp Duty surprise, which hit the top end of the market. The most dramatic increase on a monthly basis was in the borough of Merton with average house prices jumping 4.6% on the previous month.