House price rises in 20 snapshots
01-02-2014
An insight into how house prices took off again in 2013 - and why experts think they will keep rising
Average UK house prices rose 5.5pc year-on-year in October to reach a new record high of £247,000. Photo: GETTY
By Nicole Blackmore
House prices grew tremendously in 2013, buoyed by a demand for properties and a renewed willingness by the banks to lend.
The market was given an additional boost by the Government, which took measures to encourage lenders to boost mortgage volumes and help buyers with a small deposit onto the ladder.
Experts predict the recovery will continue into 2014. The Office for Budget Responsibility, the Treasury forecaster, believes house prices will rise by 5.2pc over the next 12 months and by 7.2 per cent in 2015.
Here are the key facts and figures that define the state of the market - and how it has changed since the 2008 financial crisis.
1. The average house price to earnings ratio has remained above 5 all year and reached a peak of 5.36 in November. In other words the average house costs 5.36 times the average annual wage. The long-term average house price to earnings ratio (calculated over more than 40 years) is 4.1. (Nationwide)
2. Average UK house prices rose 5.5pc year-on-year in October to reach a new record high of £247,000. This compares to a 2008 peak of £228,000 and a post-crisis low of £226,000 in 2009. (Office for National Statistics)
3. The average price of a UK home is expected to burst through the 3pc stamp duty threshold next year. The average UK house price is expected to grow to over £250,000, putting it in the £250,000 to £300,000 banding, at which point stamp duty jumps from 1pc to 3pc.
4. Year-on-year prices in England in October - the latest reading - increased 5.7pc to reach £257,000 on average, by 2pc in Wales to £164,000 and by 3.3pc in Scotland to £184,000. (ONS)
5. Northern Ireland recorded a 4.8pc annual increase in prices in October but average prices at £129,000 were still 50pc below their 2007 peak. (ONS)
6. London recorded a 12pc annual increase in property prices, which pushed the typical house value there to £437,000. (ONS)
7. Prices in London were nearly 17pc higher than pre-financial crisis levels, while those in the South East and the East of England were around 1pc higher than their previous 2008 highs. (ONS)
8. Prior to the crisis, London prices peaked at £351,000 in 2008, then fell almost 4pc to a low of £338,000 in 2009. Since then, prices have grown almost 30pc. (ONS)
9. Yorkshire and the Humber recorded the smallest annual increase, rising 0.8pc over the year to take average prices to £167,000. (ONS)
10. When interest rates rise, millions of homeowners will be forced to rein in their spending or take a second job. Almost a third of the 11m households who currently have a mortgage will have to change spending habits or work longer hours if interest rates climb to 3pc from their current low of 0.5pc - even if annual pre-tax incomes grow 5pc. Under the most extreme scenario, where wages are frozen and rates hiked by 2.5 percentage points, the Bank said half of mortgage holders would have to slash spending. (Bank of England)
11. House price inflation is expected to be above 5pc in 2014 and 7pc in 2015. (Office for Budget Responsibility)
12. Nearly 93,000 UK home owners became "property millionaires" in 2013 thanks to rising property prices, with almost 60,000 of them in London. The total number of homes valued at £1m-plus reached 393,127, with 239,703 in the capital. (Zoopla.co.uk)
13. London’s exclusive borough of Kensington and Chelsea had the highest number of properties worth over £1m at 41,393. (Zoopla)
14. Stamp duty paid by home-buyers looks set to exceed £6bn this year and is predicted to grow by a further 50pc to £9bn in the next five years. (Council of Mortgage Lenders)
15. The average spend on rent will soon overtake the average mortgage cost. Rent rose 12pc from £121.50 per week to £136 per week between 2010 and 2012, while mortgage costs rose just 6pc from £130.80 to £138.60. (ONS)
16. Mortgage approvals surpassed the 60,000 end-of-year target by July. This was a clear sign that demand for properties was strong, which pushed up house prices. Approvals are, however, expected to remain well below their pre-crisis yearly average of around 90,000. (Bank of England)
17. The number of loans advanced to first-time buyers rose to 26,800 mortgages in October – 33pc higher than the same time last year and the highest number of loans in a monthly period since November 2007. (CML)
18. House sellers increased their asking prices by 4pc in November compared to a year ago, marking the biggest annual rise since 2007. (Rightmove)
19. The Funding for Lending scheme, which provided banks with cheap state-backed funding, pushed the average two-year fixed rate down from around 3.75pc in June last year to around 2.5pc in September. Lower rates encouraged more people to buy homes and the increased competition for properties pushed prices up. (Bank of England)
20. Phase two of the Government’s Help to Buy scheme made £12bn of guarantees available for up to £130bn of mortgage lending. The mortgage guarantee scheme was designed to help first-time buyers and existing property owners move up the housing ladder and is helping push up prices. Critics argue the scheme will artificially inflate house prices and cause a bubble, but the £12bn of guarantees represents less then 0.3pc of the total value of UK housing - around £4.4trn. (Treasury, ONS