According to the latest report from Acadata, average prices in England and Wales rose slightly in December, with the average home increasing just £90 in value.
The annual growth rate fell for the seventh month in a row, to just 0.2% – down from 0.9% in November and the lowest annual increase since March 2012.
The average price of a home in England & Wales finished the year up £553 year on year, but £5,200 under the peak in March. At £300,846, prices remain above the £300,000 mark, and December marked the second month in a row that prices rose after several months of falls.
Oliver Blake, Managing Director of Your Move and Reeds Rains estate agents, said: “The end of 2017 was relatively quiet for house movers, particularly in the capital. Outside of London, however, the majority of regions still reported growth over the month, demonstrating that there is still some strength going into the new year.”
Much of the market’s struggles in the last year can be traced to the capital. London is the first region in England & Wales to see annual prices fall. Excluding the capital and the South East, both of which have seen a slowdown over the last month, growth for the rest of England and Wales remains a more respectable 3% for the year, continuing to beat inflation of 2.8% (RPI).
Nevertheless, the market does face challenges: tax changes have hit demand from buy to let investors, and numbers of first time buyers (FTBs) remain below the long-term average – although with stamp duty exemptions introduced for first time buyers in the last Budget, FTB registrations are starting to look more promising. The estimated number of transactions for 2017, at 874,385, is down 5.3% on last year, and the lowest since 2013.
London alone in the UK has seen prices fall over the last year. Prices in the capital are 4.1% down on a year ago, with the fall accelerating (from 2.6% a month before). So far, the impact is not being felt more widely, or at least not beyond the South East, so that gap between the annual rate for England and Wales is now 2.8% – its widest in three years.
It continues to be the top of the market in London that suffers most: the City of Westminster (down 19.4% annually), Hammersmith and Fulham (down 13.6%) and Wandsworth (down 12.1%), all in the top seven most expensive boroughs, are among those to have seen double digit falls over the year. Kensington and Chelsea, still the most expensive borough with average prices of £1,837,077, only just escapes the same fate, with prices down 9.3%.
Only Southwark, where prices fell 21.1%, performed worse, but prices in the mid-market overall in London held up better: the middle 11 of London’s 33 boroughs saw average prices fall 2.6% over the year, compared to 5% for the top third. The cheapest 11 boroughs still managed a modest rise in prices (up 0.2%), despite falls of 8.6% in Newham and 6.8% in Greenwich.
London-wide the average price was £587,640 at the end of November, down from £612,875 a year before.
London is largely out of step with the rest of England and Wales, where the market remains broadly positive. Not only are other regions continuing to see strong annual growth, principally the South West and North West, up 5.3% and 3.9%, respectively, but the rate of growth continues to increase (from 4.5% and 3.6% a month before). Growth in Wales continues steady at 3.6%, meanwhile, and the West Midlands (3.3%) and East Midlands (3%) also continue to show performance growth.
So far, ripples from the slowdown in London have only really reached the South East, where annual growth has slowed to 1%, from 1.8% a month earlier. Whether the decline in annual growth in the East of England (which led growth in early 2017) to 2.7% is a sign of the slowdown spreading will become clearer in the coming months.
What is clear is that, so far, declines in London are not at all reflected in other major cities in England & Wales. Many of them continue to set new peak average prices. In the South West prices in Bristol are up 8.9% annually; in the North West, Merseyside is up 6.9% (and Greater Manchester up 3.0%); Cardiff in Wales has seen growth of 4.4%; and the West Midlands region, which includes Birmingham, is up 5.5%. Even in the South East, Southampton continues to power away with growth of 5.6%. The UK’s cities are, for the most part, performing well.
In fact, growth remains widespread across England and Wales: of the 108 unitary authority areas, 88 (more than 80%) have seen prices increase over the last year, and 28 locations saw a new peak price in the last month – seven of them in the South West. They include Bristol, which saw the biggest rise in average prices of any area bar Rutland (which was up 11.3%, but based on relatively few transactions). It is terraced properties driving those values, with the average price in the city up from £290,000 in 2016 to £320,000 in November 2017.
At the other end of the spectrum, Bracknell Forest has seen the biggest fall in values annually, down 14.9%. Again, it’s terraces where the changes are most marked.
Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst comment: "The year 2017 ends with house price growth continuing to slow on an annual basis.
In December the rate, when including London and the South East, fell to 0.2%, the lowest it has been since March 2012, over 5-and-a-half years ago - this is the seventh consecutive month in which the annual rate has fallen. Looked at on a monthly basis, average house prices in December edged up, but only by a minimal £90 over the previous month. However, this token increase still represents the second month in a row in which the monthly rate has remained in positive territory (just) after seven months of falls, and should it continue will ultimately be reflected in the annual rate.
The average price of a home in England & Wales is now £300,846, which is £553 - or 0.2% - above that seen at the end of 2016, and remains above the current £300,000 threshold, below which first time buyers pay no stamp duty. This end year price is some £5,200 lower (1.7%) than the peak average price for a home in England and Wales, which was set in March 2017. This is in nominal terms, and well below RPI at 2.8%.
However, if we exclude London and the South East from our calculations then house prices in England and Wales are continuing to increase by 3.0% per annum. The ‘gap’ between the annual rate when including and excluding London and the South East is currently 2.8% - this is the widest it has been since November 2014. Moreover, London is the first region in England & Wales where the annual rate of house price inflation is now currently negative.
The question is will we see more regions in this condition?