ONS: house price growth slows to 5.2%

On a seasonally adjusted basis, average house prices increased by 0.8% between June and July 2015, compared to an increase of 1.2% in average prices during the same period a year earlier.

The softening in the annual pace of house price growth continues a trend that has been in evidence since mid-2014: twelve months ago, the annual rate of house price growth reached 11.5%, more than double the headline rate this month.

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% over the year to July 2015, down from 5.2% in the year to June 2015.

This month, average house prices in 7 of the 9 English regions are at record levels, with prices in the North West surpassing the pre-economic downturn peak of January 2008 for the first time. The only English regions not now at record levels are the North East and Yorkshire and The Humber.

Prices paid by first-time buyers were 4.4% higher on average than in July 2014. For owner-occupiers, prices increased by 5.5% for the same period.

Andy Frankish, New Homes Director at Mortgage Advice Bureau, commented:

 “Today’s figures show homebuyers purchasing new build properties have experienced greater annual house price rises than those buying pre-owned properties. New build properties are not immune from house price growth, and government schemes such as Help to Buy have stoked demand for this type of property among consumers. However, the typical new build house price is still lower than the national average, and financial assistance in the form of the equity loan scheme means this can be a much more affordable route onto the property ladder.
 
“While purchasing a new build property can be cheaper than buying a pre-owned property, the fact remains that there are simply not enough new homes being built. Although property completions have risen slightly, house building starts fell 14% in Q2 2015 compared to the previous quarter, leaving the supply of new homes way behind target.
 
“Today’s Inflation Report from the Bank of England emphasises that there is ever-increasing demand for house purchase, and it is no secret that consumers are jumping on the property ladder to make the most of the rock bottom mortgage rates before interest rates rise. It is therefore essential that new properties are brought on to the market, not only to cater for rising demand, but as a long-term solution to prevent excessive increases in house prices.”

Jonathan Adams, director of prime central London estate agency Napier Watt, said:

"Property prices continue to rise, albeit at a slower rate, but the national average masks significant regional differences and should be regarded with a healthy dose of scepticism.

"The ONS data also has a significant time lag - the market now is very different to July’s. There is plenty of stock coming up for sale with a number of properties being relaunched with price reductions. The autumn market is short - there is about six weeks left to sell a property before things slow down in the build up to Christmas - so sellers who are serious about selling must be realistic on pricing and be prepared to compromise. Many properties are now priced where they should have been when they first came to market in the spring but it could be argued that they are still not as low as they need to be.

"There is no doubt that prime central London in particular will remain exceptionally sought-after with continued inward investment but we cannot expect double digit property inflation to continue while the government continue to take a higher and higher tax revenue from these international buyers."