London overshadowed by East and South East house price growth

The Office of National Statistics (ONS) House Price Index for July 2015 figures have shown:

  • UK house prices increased by 5.2% in the year to July 2015, down from 5.7% in the year to June 2015.
  • House price annual inflation was 5.6% in England, 0.3% in Wales, 7.4% in Northern Ireland and -1.3% in Scotland.
  • Annual house price increases in England were driven by an annual increase in the East (8.3%) and the South East (6.7%).
  • The pace of annual house price growth slowed across the majority of the 9 English regions in July 2015.
  • The largest annual increase was again in the East at 8.3% (down from 9.2% in the year to June 2015), followed by the South East (6.7% increase in the year to July 2015, down from 7.7%).
  • The North East was the only English region to see a fall in prices; here prices fell by 0.7% over the year. This is the first annual fall in North East house prices since July 2013.
  • London prices increased by 5.5% over the year to July 2015 (up from 5.3% in the year to June 2015).
  • Excluding London and the South East, UK house prices increased by 4.4% in the 12 months to July 2015.
  • On a seasonally adjusted basis, average house prices increased by 0.8% between June and July 2015.
  • In July 2015, prices paid by first-time buyers were 4.4% higher on average than in July 2014.
  • For owner-occupiers (existing owners), prices increased by 5.5% for the same period. 

Peter Rollings, CEO of Marsh & Parsons, comments:

“London usually leads the charge in terms of UK house price growth, but it’s been kicked into touch for a few months now by improvements in the East and the South East. Nevertheless, property values in the capital are steadily gaining ground and are comfortably above where they were last summer when 2014’s energetic first half started running out of steam.

“However, the property market in London has evaded a number of challenges – such as the threat of Mansion Tax and coming to terms with the Stamp Duty reforms – in the last year and emerged all the stronger for it. It remains a top destination for buyers and investors alike, and will shortly revel in the global spotlight afforded it by the Rugby World Cup kicking off later this week. Almost half a million visitors are expected to come to London during the six-week tournament, placing it in to the international shop window once again.”

Andy Knee, Chief Executive of LMS, comments:

“With the first half of 2015 behind us, it’s a positive sign to see a general slowdown in the rate at which house prices are rising from the start of the year, easing the pressures on hopeful buyers. It’s good news in particular for first-time buyers who saw the average amount paid increase by less than existing owner occupiers and the overall industry average, offering them some much-needed relief (1).

“A slowdown may be welcome for buyers, but it doesn’t completely allay affordability issues for prospective owners. Waning housing stock and the imbalance between supply and demand desperately need to be addressed, particularly in London and the South East where dwellers outside the core zones 1, 2, and 3 are emerging as property millionaires due to a stark shortage in affordable housing (2).

“The drop in inflation to zero percent again in August 2015 has likely been the catalyst of a stronger pound and cheaper exports, which will continue to generate speculation about a bank base rate rise. As rumours spread – regardless of whether a rise occurs or not – existing homeowners and hopeful buyers should take advantage of the opportunity to remortgage or fix now to secure the best possible rates before the close of the year.”

Patrick Bamford, Director at Mortgage Insurance Europe for Genworth, comments:

“On the surface, the latest ONS figures suggest a positive story for first-time buyers: house price growth has slowed in recent months to the lowest level since July 2013, and first time buyer prices are rising slower than those paid by homemovers, all of which suggests improving conditions for those hoping to fulfil their ambitions of home ownership (1).

“However, this does not present the full picture. A lack of access to affordable mortgages continues to hit hopeful first-time buyers as limited lending through high LTV products endures. Help to Buy has encouraged greater availability of products for those with deposits of just 5% or 10%, yet take-up remains restricted. These restrictions compounded with rising house prices and a lack of supply means first-time buyers are still typically putting up a 20% deposit: a monumental hurdle to overcome before stepping onto the property ladder.

“Even improved pricing of loans is not enough to counter the trials first-time buyers face. Although the price gap between 75% and 95% LTV mortgages has narrowed, all but the wealthiest – or those with support from the Bank of Mum and Dad – still face far higher costs, squeezing monthly budgets (3).

“The Government needs to introduce a permanent system of private mortgage insurance to drive a genuine recovery of the high loan-to-value (LTV) market. Under the current system lenders are able to simply pay lip service to the offering and, most importantly, Help to Buy remains a temporary solution to a permanent problem. Transitioning the government scheme to the private mortgage insurance sector is the only way to support the ambitions of homeownership and make affordable mortgages permanently available in greater numbers.”

Adrian Gill, Director of Your Move and Reeds Rains estate agents, comments:

“We’ve seen annual house price growth falter among the ranks recently. But now on a monthly basis, growth is starting to regroup – clambering up from 0.6% in June to 0.8% in July. Since then, we’ve recorded the strongest monthly price rise for a year in August, as buyers square up against depleted numbers of sellers. Price growth in London is also beginning to mount a counterattack, with annual rises strengthening in the capital as buyers start to adapt to the new tax regime.

“Buyer morale is very high all across the country, and the going looks good as economic conditions pave the way for a continuation of cheap borrowing for the remainder of the year. Meanwhile, as the Government turns its attention to the buy-to-let sector, first-time buyers may be given some more elbow room in their competition with landlords.”

References

  1. The average price paid by first-time buyers increased by 4.4% in the year to July 2015, while it increased by 5.5% for owner-occupiers over the same period.
  2. http://www.telegraph.co.uk/finance/property/house-prices/11850002/Mapped-House-prices-by-Londons-Tube-stops-1m-homes-now-reach-Zone-6.html
  3. Genworth’s latest LTV tracker found those with small deposits still face mortgage payments 69% higher than those with ≤75% LTV loans
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