UK annual property price growth dips slightly, latest official data shows

UK house prices increased by 5.2% in the year to July 2015, taking the mix adjusted price of a home to £282,000, according to the latest data from the Office of National Statistics (ONS).

This mean annual growth was down slightly from 5.7% in the year to June 2015 and excluding London and the South East, which tend to have higher prices, the average annual growth was 4.4%.

A breakdown of the figures show that the average mix-adjusted house prices in July 2015 stood at £295,000 in England, £173,000 in Wales, £154,000 in Northern Ireland and £196,000 in Scotland.

London continued to be the English region with the highest average house price at £525,000 and the North East had the lowest average house price at £156,000. London, the South East and the East all had prices higher than the UK average price of £282,000.

House price annual inflation was 5.6% in England, 0.3% in Wales, 7.4% in Northern Ireland and down 1.3% in Scotland. Annual house price increases in England were driven by an annual increase in the East of 8.3% and the South East at 6.7%.

The data also shows that in July 2015, prices paid by first time buyers were 4.4% higher on average than in July 2014. For owner occupiers (existing owners), prices increased by 5.5% for the same period.

Overall average house prices in seven of the nine 9 English regions are at record levels, with prices in the North West surpassing the pre-economic downturn peak of January 2008 for the first time. The only English regions not now at record levels are the North East and Yorkshire and The Humber.

It is weak supply that is driving up prices, according to Rob Weaver, director of property at residential investment platform Property Partner. ‘The supply issue is nothing less than an enigma. Given that properties overall are commanding decent prices, you would expect to see more people selling. Something in the market is broken. Even though employment levels are strong, consumer confidence may not be as robust as surveys suggest,’ he said.

‘Many households are almost certainly wary of not being able to secure a mortgage under the new lending rules, and that could be impacting their intent to move. Households have almost certainly become more conservative in the wake of the global financial crisis. Paying debt down has become more appealing than racking it up,’ he pointed out.

‘Many are doubtless sitting on their hands until the economic picture gets clearer because the recovery has become less definitive during the first half of the year. This latest data shows that the property market has become a lot more balanced, with sustainable levels of price growth across a number of regions. It is almost a relief to see prices in the capital growing at 5.5%, compared to the high double digit growth rates of a two years ago,’ he added.

Peter Rollings, chief executive officer of Marsh & Parsons, comments pointed out that London usually leads UK house price growth, but it’s been slower in recent months now due to improvements in the East and the South East. ‘Nevertheless, property values in the capital are steadily gaining ground and are comfortably above where they were last summer when 2014’s energetic first half started running out of steam,’ he said.
 
‘However, the property market in London has evaded a number of challenges such as the threat of Mansion Tax and coming to terms with the Stamp Duty reforms in the last year and emerged all the stronger for it. It remains a top destination for buyers and investors alike,’ he added.

Graham Davidson, managing director of Sequre Property Investment, believes that it is encouraging to see good growth in areas outside of London and the South East. ‘It is particularly positive news for the North West where prices have surpassed their 2008 peak for the first time, rising a sustainable 3.7 over the past 12 months,’ he said.

‘This is great news for investors who are already collecting around 7% to 8% gross rental return and are now also benefiting from around 4% capital increases in their property values,’ he pointed out.

On the surface, the latest ONS figures suggest a positive story for first time buyers as house price growth has slowed in recent months to the lowest level since July 2013, and first time buyer prices are rising slower than those paid by home movers, all of which suggests improving conditions for those hoping to fulfil their ambitions of home ownership but Patrick Bamford, director of Mortgage Insurance Europe for Genworth is not convinced.

‘This does not present the full picture. A lack of access to affordable mortgages continues to hit hopeful first time buyers as limited lending through high LTV products endures. Help to Buy has encouraged greater availability of products for those with deposits of just 5% or 10%, yet take-up remains restricted,’ he said.

‘These restrictions compounded with rising house prices and a lack of supply means first-time buyers are still typically putting up a 20% deposit: a monumental hurdle to overcome before stepping onto the property ladder,’ he explained.
 
‘Even improved pricing of loans is not enough to counter the trials first time buyers face. Although the price gap between 75% and 95% LTV mortgages has narrowed, all but the wealthiest, or those with support from the Bank of Mum and Dad, still face far higher costs, squeezing monthly budgets,’ he added.

He wants the government to introduce a permanent system of private mortgage insurance to drive a genuine recovery of the LTV market. ‘Under the current system lenders are able to simply pay lip service to the offering and, most importantly, Help to Buy remains a temporary solution to a permanent problem. Transitioning the government scheme to the private mortgage insurance sector is the only way to support the ambitions of home ownership and make affordable mortgages permanently available in greater numbers,’ he concluded.