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Jason Tebb

Jason Tebb is the founder of Ivy Gate. He regularly comments on the UK and International property market on multiple media channels.
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Annual house price growth softened in September

·       House prices increased by 0.3% in September

·       Annual house price growth slowed to 5.3%, from 5.6% in August

 

Headlines

Sep-16

Aug-16

Monthly Index*

410.5

409.1

Monthly Change*

0.3%

0.6%

Annual Change

5.3%

5.6%

Average Price

(not seasonally adjusted)

£206,015

£206,145

* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)

Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:

“The pace of annual house price growth slowed to 5.3% in September, from 5.6% in August, though it remained within the narrow range of 3% to 6% that has prevailed since early 2015.

“The relative stability in the rate of house price growth suggests that the softening in housing demand evident in recent months has been broadly matched on the supply side of the market. Survey data indicates that, while new buyer enquiries have remained fairly subdued, the number of homes on the market has remained close to all-time lows, in part due to low rates of construction activity (discussed in more detail opposite).

“Regional price trends were also little changed. Regions in the south east of England continued to record the strongest gains even though price growth slowed noticeably in the Outer Metropolitan region (from 12.4% in Q2 to 9.6% in Q3) and in London (from 9.9% in Q2 to 7.1% in Q3). 

“House price growth remained subdued in Scotland (+2%) and Northern Ireland (+2.4%) and small price declines were recorded in Wales (-0.5%) and the North of England (-0.2%), all relative to Q3 last year.

Housing supply rising……but only gradually

“The number of new homes built in England has picked up, but is still not sufficient to keep up with the expected increase in the population. In the four quarters to Q2 2016, 139,000 new houses were completed, 30% higher than the low point seen in 2010. However, this is still around 15% below the average rate of building in the five years before the financial crisis and 38% below the 225,000 new households projected to form each year over the coming decade.

“With interest rates expected to remain low and schemes, such as Help to Buy, helping to provide those with smaller deposits access to finance, housebuilders should have confidence that there will be sufficient demand from buyers if more homes are built. The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years’ worth of construction at current rates of building activity. However, there is a risk that the uncertain economic outlook may weigh on activity in the period ahead.

Are regional housebuilding trends more sensitive to price signals?

“While construction has not kept pace with household formation at the UK level, there are signs that more houses are being built in regions where affordability is more stretched (and where it is likely to be needed the most).

“Regions that are more affordable, such as the North West and Yorkshire & Humberside, have seen the smallest increases in housing stock (with a rise of 1.6% over the 2013 to 2016 period, below the increase of 2.2% recorded in England and Wales as a whole).

“By contrast, areas such as the Outer South East and the South West, where house prices were relatively expensive, have seen the housing stock rise much more quickly – by 2.4% and 2.6% respectively, over the same period. 

“There is a fairly close linear relationship between increasing affordability pressures and increases in housing stock, at least when London and the Outer Metropolitan regions are excluded (see chart below). This suggests that supply has been less responsive to rising affordability pressures than we might have expected in the capital and the surrounding area.

“Even though London saw the largest percentage increase in its housing stock over the period (2.9%), we would have expected a rise of 4.3% given the elevated house price to earnings ratio and the experience of other regions.

“Similarly, given the elevated house price to income ratio in the Outer Metropolitan region, we would have expected the housing stock to rise by 3.2% rather than the 2.1% recorded over the same period.”

Quarterly Regional House Price Statistics

Q3 2016

Please note that these figures are for the three months to September, therefore will show a different UK average price and annual percentage change to our monthly house price statistics.

Regions over the last 12 months

Region

Average Price

(Q3 2016)

Annual % change this quarter

Annual % change last quarter

Outer Met

£358,153

9.6%

12.4%

Outer S East

£267,151

8.0%

8.8%

East Anglia

£213,831

7.3%

5.5%

London

£474,736

7.1%

9.9%

East Midlands

£169,137

5.4%

4.0%

West Midlands

£174,934

4.6%

5.1%

South West

£229,907

4.6%

5.6%

North West

£151,985

4.2%

1.8%

Yorks & H’side

£150,823

3.5%

0.8%

N Ireland

£130,581

2.4%

1.6%

Scotland

£143,275

2.0%

0.5%

North

£124,074

-0.2%

-1.0%

Wales

£146,172

-0.5%

0.9%

UK

£206,346

5.4%

5.1%

 

Outer Metropolitan leads house price growth in Q3 2016

Despite a noticeable slowing in annual price growth in the third quarter, the Outer Metropolitan region continued to top the house price growth table, with average prices up 9.6% year-on-year. London saw a further moderation in the annual rate of price growth to 7.1% (from 9.9% in Q2), resulting in the capital being outside of the top three regions in terms of price growth for the first time in seven years.  Wales was the weakest performing region, with a 0.5% year-on-year decline.

House price growth in Northern Ireland picked up slightly to 2.4%.  Scotland recorded a small annual increase, with prices up 2.0% compared with Q3 2015.

England: Signs of convergence

England (Q3 2016)

Average house price

£255,646

Annual percentage change

6.6%

Quarterly change*

1.1%

Most expensive region

London

Least expensive region

North

Strongest annual price change

Outer Metropolitan

Weakest annual price change

North

* Seasonally adjusted

Average house prices in England increased by 1.1% in the third quarter of 2016, although the annual rate of growth slowed to 6.6%, from 7.6% in Q2.         

There were tentative signs of a convergence in house price growth amongst the English regions.  Most southern regions saw a slowing in annual price growth compared with Q2, while a number of northern regions, such as the North West, saw a pick-up in growth.  Overall, prices in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) were up 7.5% year-on-year, whilst in Northern England (West Midlands, East Midlands, Yorkshire & Humberside, North West and North) prices rose by 4.0%. 

Nevertheless, it remains the case that prices in Southern England are well above pre-crisis levels, while those in the North, North West and Yorkshire & Humberside are still below their 2007 peaks.

UK Fact File (Q3 2016)

Quarterly average UK house price

£206,346

Annual percentage change

5.4%

Quarterly change*

1.3%

Most expensive region

London

Least expensive region

North

Strongest annual price change

Outer Metropolitan

Weakest annual price change

Wales

* Seasonally adjusted

 

Nations – annual & quarterly price change

Nation

Average Price

(Q3 2016)

Annual % change this quarter

Quarterly % change*

England

£255,646

6.6%

1.1%

N Ireland

£130,581

2.4%

1.4%

Scotland

£143,275

2.0%

1.4%

Wales

£146,172

-0.5%

0.2%

* Seasonally adjusted

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