Growth in house prices grinds to ten month low
02-14-2015
Warren Lewis
According to a new set of data from LSL, the 7.5% growth recorded in January is the smallest yearly improvement seen for 10 months.
Dr Peter Williams, housing market specialist and Chairman of Acadata, comments:
"In January 2015, the average price paid for a home in England & Wales was £277,857. This was an increase of £700, or 0.3% over December, almost exactly matching the fall in prices that month. The average house price is now just £25 lower than it was at the end of November 2014 - the average price has effectively been at a standstill since then.
On an annual basis, the average house price in England & Wales has risen by £19,300, or 7.5% over the last year. This represents a decline of 1.4% from the 8.9% recorded last month. It is the fifth month in succession in which the annual rate of house price inflation has fallen. Each month has shown a faster rate of decline than the preceding month, indicating a sustained reduction in house price inflation at the aggregate level."
Adrian Gill, director of Reeds Rains and Your Move estate agents, comments: “January’s 7.5% annual growth is the smallest yearly improvement witnessed for 10 months, and represents a deceleration from 8.9% in December as house price inflation continues to flag. After some recent price falls, average property values haven’t taken any steps forward from where they stood in November – and what we’re seeing is a far cry from the marathon of monthly increases that set off this time last year.
In a reversal of fortune, London is leading this slowdown. The capital has long been the propeller driving forward growth, but after cruising ahead at full speed in 2014, the London property market has run aground momentarily. Average London house prices experienced the biggest drop during December (1.1%), but this is just a symptom of the unsustainable rate of growth that the market stretched to last year, as the capital now takes a pause. While a prospective Mansion Tax and higher rate of Stamp Duty on million pound homes may be a blot on the buying landscape at the top end, everyday buyers are simply able to take their time to deliberate and get their finances in order now that market conditions have rationalised again.
With a greater supply of available homes on the market, we are striking a better balance between sellers and buyers, and at the bottom rungs of the ladder in particular, demand remains vibrant. The lowest priced London borough, Barking & Dagenham, has seen the biggest boost in home sales during Q4 2014, up 33% on the same period a year previously, helping to drive annual house price growth of 14.4%.
The London story acts as a miniature model of what’s happening in the rest of the UK housing market. The market is temporarily treading water at the higher end, but fast-moving in areas where price growth has been more modest, and where cheaper properties are within reach of new buyers and borrowers who can access Help to Buy. For instance, when you exclude the colossal London and the South East from the equation, the slowdown in annual price growth is much shallower, as growth across other parts of the country continue to sail along steadily. The North saw the biggest uplift in prices in December, while property values made similarly positive progress in Yorkshire & Humberside, and Wales. In these areas demand is thriving as buyers enjoy the perfect storm of record low mortgage rates, more affordable house prices and lower stamp duty costs, and the best properties are being snapped up quickly. Coupling those conditions with steady price growth, buyers are seeing many reasons to act now.
While sales volumes across the south are slightly more sluggish, the North is the current powerhouse of activity, with completed home sales up 7.0% year-on-year during Q4 2014, followed by 4.1% annual increase in Yorkshire & Humberside. This growth is built on sustained first-time buyer appetite for homes, and as this slice of the market continues to grow, flats and terraces are changing hands at the fastest pace – as the property type most common among new buyers. For example, Yorkshire & Humberside have seen the most significant jump in flat sales during Q4 2014, up 18.6% year-on-year.
Overall, completed home sales in January dipped a slight 0.5% compared to a year ago, but with Stamp Duty savings now sweetening the deal and low mortgage rates fostering a host of competitive long-term fixes, homeownership is spreading its wings and breeding further confidence in the market – all in all, it’s a promising start to the New Year.”