House prices in England and Wales see first return to growth since March

Warren Lewis
18th December 2017
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The latest report from LSL has revealed that average house prices saw a return to growth in November after several months of slowdown.

According to analysis, the average value of a home in England and Wales in the month increased by £818, up 0.3%. At £300,859 in November, the average price also remains above the £300,000 mark, which it crossed last December.

On an annual basis, growth continues to weaken. At 0.9% it’s at its lowest since April 2012, but the return to monthly growth may signal the culmination of a turnaround that can be seen since September, when monthly price falls started to slow. London and  the South East remain a pull on the market, though.

Without them, annual price increases are 3.3%, up from 3.2% in October.

Transactions in November 2017 in England & Wales are estimated to be 77,500, marginally up on the same month last year. The return of monthly growth has come just in time to save the market from recording an annual decline in prices. Nevertheless, the rate of growth in November at 0.9% continues the consistent downward trend begun in June. Only a year ago, annual price growth was 6.3%.

Despite the turnaround last month, the monthly falls since March also mean average prices remain more than £5,000 lower than their peak earlier this year of £306,063.

There are some encouraging signs, though. First, monthly changes finally seem to be on an upward trend. Second, the relative underperformance of London, which has done much to weaken the national figures, appears to be easing. Finally, buyers in the coming months will benefit from the key budget announcements of an exemption from stamp duty for first time buyers on homes up £300,000 and more money for the Help to Buy scheme.

Prices in the Greater London area fell 0.6% in October to £586,987, down 3% from a year ago. The key pressure on prices continues to be affordability, and recently published figures from the Office for National Statistics’ Annual Survey of Hours and Earnings (ASHE) show the scale of the challenge.
Taking the ASHE figures for median annual earnings in the capital (£36,010) as a ratio to median house prices (£460,000) gives a figure of 12.8. That compares to just 4.7 and 4.8 in Scotland and the North East, respectively – the two cheapest regions in the UK.

The impact of affordability is also reflected where prices have been dropping most: the 11 most expensive of London’s 33 boroughs have seen prices fall 5% in the last 12 months; the second 11 are down 2.6%; and the cheapest third have risen 0.2%.

Fortunes vary widely, however. Even in the cheapest 11 boroughs, four have seen prices drop in the last 12 months; and in the most expensive 11, seven have seen prices increase. Moreover, over August to October 2017, the top three boroughs by price – the City of Westminster, Camden and Kensington and Chelsea – also saw the biggest increases in transactions, up 28% for the first two, and 23% for the last. It seems momentum is returning to sales in prime central London.

On an annual basis the biggest fall in prices in the capital has been 18.2% in the City of Westminster (which also saw the biggest monthly fall in October – down 5.7%), followed by Southwark, down 17.9%. The biggest increase has been in Redbridge, up 8.6%, followed by Haringey, up 8%.

Annual price growth continues to slow across England and Wales, but average values remained £3,847 higher in October than a year before – up 1.3%.
That reflects the fact that the majority of areas in England and Wales have proved resilient. Of the 108 unitary authorities, 81% have recorded an increase in the last year, and every region bar Greater London has seen prices rise.

The 20 areas that have seen falls are spread across the country, with the exception of the South West, where all 15 unitary authorities have increased in price in the last year.

The South West also now leads price growth in England and Wales, overtaking the North West in the last month, with annual growth of 4.3%. That’s supported by strong performance in Bristol (up 7.1% annually), Gloucestershire (also up 7.1%), Wiltshire (6.4%) and Torbay (6%).

The North West and West Midlands, both up 3.4%, also continue to prove robust, as does the East Midlands (3.2%) – and Wales, which has moved up the league table of regions to fourth place with 3.3% growth. As recently as June it was bottom of the table. The Vale of Glamorgan (up 9.6% - the biggest annual increase of any unitary authority), Bridgend (8.6%) and Caerphilly (8%) have all grown particularly strongly in the last year.

Of the 18 unitary authorities to see a new peak price in October, five were in the South West, and three each in the East Midlands and Wales.

At the other end of the spectrum, the South East continues to see slower growth with prices up just 1.8% in the last year. The region includes Bracknell Forest, where prices are down 13.4% – the biggest fall in the last year. On the other hand Portsmouth (up 7.6%) and Buckinghamshire (up 7.1%) are two areas in the region that continue to perform well.

More surprisingly, the slowdown that began in London and has spread to the South East may also now be affecting the East of England. The region, which as recently as August led growth in England and Wales, is now in sixth place, with annual growth of 2.8%, only marginally ahead of Yorks & Humber (2.6%).

Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst, comment: "House price growth continues to slow on an annual basis. In November the rate fell to 0.9%, the sixth month in which it has fallen from the May peak (in percentage terms), and the lowest it has been since April 2012, over 5-and-a-half years ago. However, on a monthly basis average house prices have increased by £818, or 0.3%, moving into positive territory after several months of falls. The average price of a home in England & Wales now stands at £300,859, the same level as seen in December of last year. This is some £5,000 lower than in March 2017.

Although monthly rates had been negative for the period April 2017 – September 2017, the direction of travel in house prices has been upward since August, when including London.

One of the major features of the current market is the continued decline in prices in Greater London, on which we report on page 9. However, the ‘gap’ between growth rates in the country when including and excluding London is narrowing. One positive signal from the London marke is a 25% increase in transactions among the top three boroughs in prime central London. Movement at the top end of the market helps to increase activity all the way down the housing chain.

Meanwhile, the South West has become the region with the highest growth in house prices. Devon and Cornwall are currently experiencing an upturn in housing demand, with both counties establishing new peak average prices."

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