UK property market enters a period of stagflation

UK property market enters a period of stagflation

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%.

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Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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