Regions join London in surpassing house price peak

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While there are tentative signs that the housing market may be coming off the boil somewhat in London and the South East, it appears that other regions are now beginning to catch up. woman-and-house

The most recent figures from the Office for National Statistics show that three more regions have joined London, the East of England and the South East in surpassing their previous house price peaks.

Three more regions join the property party

House prices in the UK rose strongly in the year to the end of July and the East Midlands, West Midlands and the South West have all now joined the property party.

In each of the three regions, property prices have now surpassed the last house price peak seen in 2007 and early 2008, just before prices plummeted in many areas.

On average, prices rose by 11.7% during the period, with the biggest rise of 19.1% being seen in the London area.

No joy for first-time buyers

Unfortunately for those looking to get a foothold on the property ladder, prices paid by first-time buyers rose by even more than the average.

In the highest annual increase since March 2005, first-timers paid an average of £209,000 for a home, which is 13.5% more than a year before.

As Matt Hutchinson, director of flat and house share site SpareRoom.co.uk, told the Independent newspaper. “If there’s one clear trend, it’s that the prices being paid by first-time buyers are rising at a faster rate than they are for existing owners.”

And he added that, for those currently renting, “it’s a bleak future, as their aspirations of home ownership slip further away.”

Low inflation compounds the problem

At the same time as the ONS published its latest house price figures, it also revealed that the headline rate of inflation dropped slightly in August to 1.5%, down from 1.6% the month before.

This compounds the problem for buyers, as wage increases generally remain as low, if not lower, than inflation.

So it becomes even more difficult for many people to secure a mortgage sufficiently large for them to buy a home, as house prices have been rising faster than inflation.

North/South divide continues to widen

The divide between house prices in the south and north continues to diverge. The ONS figures show that the slowest rate of growth was seen in Northern Ireland, at 4.5%, followed by the Humber and Yorkshire at 5%.

Other recent stats suggest a slowdown

While the ONS figures are perhaps the most accurate for the time span they cover, they aren’t quite as up-to-date as other indicators, which suggest that the market might be cooling a little.

Halifax’s most recent statistics for August show a slowdown from July. However, this might just be part of the usual seasonal summer trend for house prices to level off a little.

September’s figures could once more show that the British housing market is continuing its remarkable hot streak.

Are house prices really too high?

Not all experts feel property prices have reached unaffordable levels however. Some argue that outside of the capital prices are fair value, having risen from the relatively low levels reached during the financial crisis which began in earnest in 2008.

Regional figures

Here are the ONS’ figures for regional house price rises over the 12 months to the end of July, with the average price of a home in each region given first:

  • Total UK: £272,000, annual rise of 11.7%
  • England: £284,000, up 12%
  • Wales: £171,000, up 7.4%
  • Scotland: £198,000, up 7.6%
  • Northern Ireland: £139,000, up 4.5%
  • North East of England: £156,000, up 9.5%
  • North West of England: £175,000, up 7.7%
  • Yorkshire and the Humber: £174,000, up 5%
  • East Midlands: £187,000, up 7.6%
  • West Midlands: £198,000, up 7.3%
  • East of England: £282,000, up 10.6%
  • London: £514,000, up 19.1%
  • South East of England: £337,000, up 12.2%
  • South West of England: £246,000, up 7.1%

Market value isn’t insurance value

Don’t forget that when you’re insuring your home, it’s not the market value that counts, but how much you would have to pay to have it re-built from scratch.

Your home might be worth £400,000 if you sold it tomorrow, but might possibly only cost £180,000 to re-build.

Policy Expert

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The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.