According to the latest data and analysis from Hometrack, house price growth has been lower than inflation for six consecutive months.
Whilst the average asking price is 3.3% more than in July 2016, the Retail Price Index (RPI) is rising faster (4.1% in May, according to the Office for National Statistics - Hometrack estimate the current value to be around 4.5%) making home prices fall overall, in real terms, by around 1.2%.
At present, only four regions are showing genuine real rises in asset values, namely: the East of England, the East Midlands, the West Midlands and the South West.
Forecasts are for the RPI to 'spike' and fall back to around 3% over the next few years. However, in the wake of the London boom, UK home prices look set to endure several years of low growth, hence this stagflationary period could be rather prolonged.
With Greater London, the worst performing area, showing zero price growth year-on-year, it is the regions that are supporting the current overall growth figure. The main contributors are the East of England, the East Midlands, the West Midlands and the South West, all with year-on-year price rises above 4%.
However, an unseasonal price dip in the East of England suggests that mounting supply (up 18% in the region) coupled with record high pricing is taking its toll on demand. Hence, looking forward, this region may not contribute to the overall growth figures as before.
Market conditions in the North continue to improve. The Time on Market of unsold property has reduced by 5% since July 2016 in both the North East and the North West, although the Typical Time on Market remains much higher than in the South.
Prices are also rising in the North with home values increasing at a greater rate than in recent years. Annualised growth in the North West is now outpacing London and the South East, but still remains lower than the national average in Yorkshire and the North East. Wales and Scotland have also shown some moderate growth over the last six months but the Typical Time on Market is not improving in either country. In fact, in Scotland the median is now 5% longer than in July 2016, although falling supply (-15%) will help support prices going forward.
For the time being, the East of England continues to head the regional league table for price growth, closely followed (and perhaps soon to be overtaken by) the East Midlands. However, the national figures continue to reflect a stagflationary housing market, where price rises are no longer keeping pace with inflation.
Hometrack notes that the asking rents in the Greater London region are falling (5.6% YoY or around 10% when adjusted for inflation) and this in turn is producing downward pressure on asking prices. Hence, they are expecting significant price falls in the capital region over the autumn and winter months ahead.
In July 2016 the annualised rate of increase of home prices was 6.1%; today the same measure is 3.3%.