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London leads house price charge

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Written by: Christina Hoghton
12/07/2016
Average house prices rose in the second quarter of the year, but the annual rate of inflation is cooling

Average UK house prices rose by 1.8% during the second quarter of 2016 and were up 8.5% compared to the same period a year earlier, according to the latest quarterly data from the Halifax House Price Index, administered by Markit.

But London house prices are now more than double the UK average.

Property price inflation has taken the average UK house price to a record of £215,582. House prices have now risen on a quarterly basis for 15 successive quarters, and prices are also up some 36.6% since the height of the financial crisis in the spring of 2009.

However, despite prices rising by 8.5% annually the pace of change has slowed to it lowest recorded level since the third quarter of 2015.

Regional split

There are still huge regional variations in terms of both house price inflation and standard house price levels.

London, followed by the South East, remains by far the most expensive area to buy housing, with the average house price in the capital pushing close to £450,000 in the second quarter of this year.

With London prices now almost four times the average price paid in the area of the UK with the lowest house value – currently Northern Ireland at £119,000 – the gap between the most expensive and cheapest regions is at a new record of nearly £330,000.

Annual house price inflation was 14.6% in the capital and 13.9% in the South East (13.9%), but, outside of these two regions, no others recorded double-digit house price rises with most registering considerable slowdowns compared to the previous quarter. Scotland (-1.6%) and Wales (-0.6%) both saw modest year-on-year falls in house prices, while the rate of inflation in Northern Ireland fell sharply to just 3.5%.

House prices in Northern Ireland are still a whopping 48% down on their peak of 2007, while in Wales they remain close to 10% down on pre-financial crisis levels and 6.4% down in Scotland. Other regions currently recording house price levels below pre-financial crisis highs include the North (- 6.9%) and the North West (-2.5%).

Chris Williamson, chief economist at Markit, said: “The UK housing market showed signs of cooling in the spring, with the annual rate of inflation slowing to 8.5%.

“Some of the heat therefore seems to have come off the housing market. However, the extent to which this is a reflection of Brexit worries or the increase in stamp duty in the Budget remains uncertain.

“The weakest trends were in Scotland and Wales, the only two areas in which house prices were lower than a year ago in the second quarter.”

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