UK annual house price growth increased to an average of 3.5% in September, from 3.1% in August, according to the latest House Price Index from the Office for National Statistics (ONS).
However, over the past two years, there has been a slowdown in UK house price growth, driven mainly by declines across the south and east of England.
In September, the lowest annual house price growth was recorded in London, where property values fell by an average of 0.3%, which is up from -0.6% in the year to August 2018.
The average UK house price in September was £233,000. This is £8,000 higher than in September last year.
On a non-seasonally adjusted basis, the average property value in the UK was unchanged between August and September this year, compared to a monthly decrease of 0.4% during the same period of 2017.
On a seasonally adjusted basis, the average house price rose by 0.3% between August and September 2018.
House prices in England grew slower than other countries of the UK in the year to September, at an average rate of 3.0%, which is up slightly from the 2.8% recorded in August 2018. The average property value in England is now £249,000.
In Wales, the average house price was up by 5.8% in the 12 months to September, to hit £162,000.
Scotland also recorded growth of 5.8% over the same period, taking the average property value to £153,000.
The average house price in Northern Ireland stood at £135,000 in September, following an increase of 4.8% over the year to the third quarter of 2018.
UK Annual House Price Growth Up in September, Reports ONS
At a regional level, the West Midlands recorded the highest annual house price growth in September, at an average of 6.1%. The East Midlands followed this, at 6.0%.
The English regions with the slowest annual growth were all in the south and east of the country, with the lowest being in London, where the average house price fell by 0.3% over the 12 months to September. Property values in the capital have dropped every month this year since March 2018.
While annual house price growth in the south and east of England is slowing, they remained the most expensive areas to purchase a property in the country. London had the highest average property value, at £482,000, followed by the South East and East of England, at £328,000 and £294,000 respectively.
The lowest average house price continued to be found in the North East, at £132,000. The North East is the only English region yet to surpass its pre-economic downturn peak, the ONS reports.
Recent negative house price growth in London is driven primarily by inner London, for which annual growth has been consistently negative since January 2018. Annual house price growth for outer London has remained low, but positive, for the whole period. Both inner and outer London seem to follow similar trends in house price growth, with changes in outer London tending to appear slightly after those in inner London.
The Bank of England’s November inflation report claims that the slowdown in the London market since mid-2016 is probably due to the area being disproportionately affected by regulatory and tax changes, and also lower net migration from the EU.
John Goodall, the CEO and Co-Founder of buy-to-let specialist Landbay, says: “Accelerating growth is being held back by falling property value in London, dragging down the rest of the country. Following years of steep price rises, affordability in the capital has become stretched. Combine this with the punitive changes to Stamp Duty and Brexit uncertainty, and it’s no wonder that would-be buyers and sellers are staying put.”
Post Office Money’s Chrysanthy Pispinis, also comments: “House price growth is slowing across the UK, particularly in the south, a trend we expect to continue while the market remains uncertain. This slowdown presents a window of opportunity for first time buyers, as changes made, such as tax incentives and product innovations, have supported more buyers to enter the market; in the last year alone, for instance, we’ve seen successful first time buyers increase by 12%.
“Increased housing supply, which has supported affordability and more deposit-free mortgage options, has helped one in ten new buyers to get on the ladder. Other changes, such as the abolition of Stamp Duty for properties up to £300,000, have helped the average first time buyer save over £2,000. These savings can make a huge difference to first time buyers’ ability to effectively plan and budget for the full costs associated with moving, which are often underestimated by 80% of buyers.”
Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, gives her thoughts: “We’re now used to seeing the UK housing market stand out from the wider economic outlook. The question is, what is driving it?
“The data betrays apparent rising stars, such as the East Midlands, West Midlands, Scotland and Wales. But, look a little closer, and it’s very much a case of all talk and no trousers.
“Growth in all these areas is clearly being powered by the price growth of new build properties. In the East and West Midlands, the price of new builds is growing at more than 7% annually, while, in Scotland, it’s 6% and, in Wales, it’s an incredible 9.4%.
“It means Help to Buy is popular, but that doesn’t mean it’s good for the country and economy in the long-run. The longer it is in place, the more the market will be very sensitive to any suggestion the scheme’s future will be curtailed.
“Adding weight to concerns about buyer incentives and their long-term effects is the lack of direction in the price of flats, which have gone nowhere over the past year and have now started falling. What’s probably happening is that first time buyers have got more money to spend and more of them are going after houses, their pockets swelled by Stamp Duty tax breaks and Help to Buy.
“Transaction levels are still very low, so there’s little wriggle room if a shock arrives from any quarter.”