LSL Property Services : Dec15 House Price Index

LSL Property Services plc / Acadametrics - House Price Index - August 2010

Under embargo until 00:01 Thursday 14th January 2016 December2015

House prices increase £18,000 in 2015

• Average house prices in England and Wales grew 6.6% annually, up £17,963 since December 2014 to reach £292,077
• But property values in Central London fell by 8.7% on average during 2015, dragged down by higher Stamp Duty
• Outside of these top five Central Boroughs, London experienced 11% boost in house prices year-on-year
• East Midlands jumps to second in regional rankings, driven by a 10.6% annual rise in Nottingham's house prices
• Strongest December for sales since 2006, up 7.1% year-on-year as buyers compete for fewer homes on the market

  
  

  House Price	Index	Monthly Change %	Annual Change %	Annual Change % (excluding London & SE)
  £292,077	283.1	0.6	6.6	4.7

  Adrian Gill, director of Reeds Rains and Your Move estate agents, comments: "The housing market has enjoyed some smooth sailing in the past year, with a steady 6.6% growth in house prices during 2015 rewarding homeowners and reinforcing our collective desire to own our own homes. The typical home across England and Wales is now worth £17,963 more than at the end of 2014, with new price records established every month throughout 2015 after twelve consecutive monthly rises. December also marks the highest year-on-year house price growth for ten months, and this may well prompt existing homeowners to move up to the next rung of the property ladder in 2016, freeing up homes at the bottom for first-time buyers. The rising tide of property prices has been propelled so far by a sinking supply of houses coming onto the market, compared with increasing enquiries from potential buyers eager to clamber aboard the property ladder. If the current speed of house price growth continues into 2016, the value of the average home may soon pass the £300,000 watermark, having reached £250,000 in December 2013. Property price rises have certainly left the recession in their wake, with house prices passing the £200,000 milestone only in October 2005.

  "During December, house prices rose by £1,650 (0.6%), a pick up from the 0.4% monthly uplift in November, and we may subsequently see prices surge further during the first quarter of 2016 before the Government's new housebuilding programmes have a chance to boost the supply of property on the market. Home sales have surfed the waves of buyer demand in December, increasing 8.5% compared to November 2015. A total of 85,000 home sales represents the best figure for this month since 2006, with sales buoyed up by the extra support available for first-time buyers and rising wages.

  "The tide certainly turned for the Central London housing market last year. The hike to the top rate of stamp duty has taken the wind out of the centre's sails, with house prices in the most expensive five boroughs falling by 8.7% on average during 2015. In Kensington and Chelsea, London's most expensive borough, prices fell by 14.2% over the year. The tax changes announced in 2014's Autumn Statement increased the rate of stamp duty on homes worth over £1.5 million to 12%, and while price increases in the central boroughs used to keep England and Wales' house price growth afloat, since January they have been anchoring down the average price increases in London - and the country overall. The reality is that there has been an undercurrent of growth in the rest of London, with values outside these top-end boroughs rising by 11% year-on-year. The increase has been strongest in the cheaper boroughs, with Newham seeing 23.8% annual growth. But the overall price rise across the capital has been submerged by the top end, with the annual change in London standing at just 5.6%, below the UK average.

  "Regionally, house prices in the South East have been increasing at a rate of knots, enjoying the fastest growth of any region. The 8.1% year-on-year price rise in the South East has been particularly propelled by demand for homes in commuter towns. Luton has seen the largest increase of 18.5% year-on-year, with the average cost of a semi-detached home in the town increasing by approximately £40,000 since 2014. The East Midlands has also seen a significant surge in house prices, overtaking East Anglia to become the second fastest growing region in England. This acceleration has emanated from a boom in the City of Nottingham, which has seen year-on-year house price growth of 10.6%, boosting the region's overall annual growth rate of 6.7%. Average property prices in the city have risen £14,691 in a year and now stand at £152,978."

  NB: The LSL/Acadata house price index incorporates all transactions, including those made with cash.

  For a more detailed market analysis by Acadata, see page 3.

  
  

  
  

  House price index: historical data

  
  

  Table 1. Average House Prices in England & Wales for the period December 2014 - December 2015 link to source Excel

  
  

  House Price	Index	Monthly Change %	Annual Change %
  December	2014	£274,114	265.7	0.0	9.0
  January	2015	£275,403	266.9	0.5	7.9
  February	2015	£276,401	267.9	0.4	7.2
  March	2015	£276,870	268.3	0.2	6.3
  April	2015	£277,751	269.2	0.3	6.0
  May	2015	£278,920	270.3	0.4	5.2
  June	2015	£280,747	272.1	0.7	4.8
  July	2015	£281,917	273.2	0.4	4.6
  August	2015	£284,924	276.1	1.1	4.9
  September	2015	£286,745	277.9	0.6	4.9
  October	2015	£289,183	280.3	0.9	5.4
  November	2015	£290,428	281.5	0.4	5.9
  December	2015	£292,077	283.1	0.6	6.6

  
  

  
  

  Press Contacts:

  
  

  Melanie Cowell, LSL Property Services	01904 698860	[e-mail]
  Richard Sumner, Acadata	020 8392 9082	[e-mail]
  Emily Barnes, Instinctif Partners	020 7427 1403	[e-mail]

  
  

  
  

  
  

  The Acadata commentary by Peter Williams and John Tindale

  
  

  Peter Williams, Chairman of Acadata and John Tindale, Acadata housing analyst comment: House prices

  The sustained rise in house prices in England and Wales continues, with December 2015 being the twelfth month in succession in which prices have risen. December prices rose by £1,650, or 0.6%. The average home in England & Wales now costs £292,077. Given the current rates of growth, the average market price looks set to pass the £300,000 mark by May 2016, having reached the £250,000 level in December 2013. On an annual basis, house prices in December 2015 have risen by 6.6%, or £17,963, representing the twelfth new peak for house prices in the calendar year.

  So what have been the main features of the housing market in 2015, which have produced these increases in prices? In short they are as follows;

  
  

  • The Bank Rate - and hence mortgage rates - continues at its lowest level since March 2009

  • Increased mortgage availability

  • Rising wages

  • Economic recovery

  • Government initiatives being in place to assist First Time Buyers and the purchase of new homes

  • A shortfall in the supply of homes on the market, along with strengthening demand

The Housing Market

Last month we quoted the Chancellor's upbeat Autumn Statement in which housing and home ownership were key themes. On 7th January in a speech in Cardiff, he highlighted the risks of interest rate rises and the need for caution regarding the economic recovery - a somewhat more downbeat picture than before, but the Prime Minister continued in the same week with further housing announcements - on direct commissioning of sites for starter homes and on estate regeneration. Such announcements, along with the continuing progress of the Housing and Planning Bill in Parliament, will ensure that housing remains high on the political agenda over the next few months.

Policy announcements aside, all the expectations for the market in 2016 are for continued growth in prices and at least some modest growth in new housing supply. Published house price forecasts for the UK vary considerably depending on views about the impact of tax changes, interest rate increases and more Bank intervention. Typically, they are in a band of between 4% and 5%, though there are outliers at 2% and up to 7% plus. The forecasts for different regions within England suggest continued diversity, with the strongest growth in the South and the weakest in the North and Scotland.

Much turns on the flow of property onto the market, with the RICS highlighting the decline in the net balance of new instructions which has been taking place since 2012, and reaching an historic low of fewer than 46 properties per surveyor branch. The RICS highlights the rise in new buyer enquiries against this lack of supply, suggesting that we can expect to see house price inflation accelerate in the first half of 2016 before falling away towards the end of the year. This is somewhat in contrast to the narrative in the recent Office for Budget Responsibility's Economic and Fiscal Outlook, where they expect prices to decline modestly in 2016 to 4.8% (from 6.2% in 2015), and then recover in 2018 before falling away until 2020. Significantly, the OBR has revised down its forecast of transactions reflecting the policy measures being introduced, though they remain close to what others are predicting as we show later.

All told, we can expect to see continued growth in prices and transactions in 2016. The pattern will fluctuate through the year and much turns on how the market digests planned policy changes plus any other interventions. There will be significant regional variation.

The Acadata commentary by Peter Williams and John Tindale

The effect of Central London

Over the past year we have been monitoring the effect of price movements in Greater London and the South East on the overall rate of house price inflation across England and Wales, and continue to do so - see Table 3 on page 7. This month we look at the effect of Central London (for a definition see below) on house price inflation for England & Wales as a whole. This is important because Central London is a market which has what might be thought of as unique characteristics - the presence of large numbers of foreign buyers who are interested in this market as both a place of residence and a safe investment (see the recent Greater London Authority report 'House prices in London - an economic analysis of London's housing market' published in November). Recent policy interventions and of course international exchange rate movements have impacted upon this market as we discuss below. Our analysis underlines the continuing price pressures in the capital as recently highlighted by the Resolution Foundation (Press Release 6th January) with more than a million families spending more than half their income on housing costs. Almost one in four (24 per cent) private renters in the capital spend more than half of their income on housing, compared to 12 per cent of mortgagors and 8 per cent of social renters.

Figure 1 below shows the annual rates of house price inflation for England & Wales when including and excluding Central London. The graph starts in December 2013 and shows that at that time the rate of house price inflation in Central London was higher than in the remainder of the country, resulting in the overall rate for England & Wales increasing by 0.5% from 5.7% to 6.2%. This was followed by a brief period when rates for Central London were similar to the rest of the country, until May 2014 when the high increase in property prices in Central London caused the overall price growth in the country to be uplifted, to a peak in September/October 2014, when rates were 1.0% higher than they otherwise would have been if Central London were excluded from the calculations.

In January 2015 the position switched, and Central London started to bring down the nationally reported house price growth. The significance of this date is that the Chancellor, George Osborne, introduced higher rates of stamp duty in his December 2014 Autumn Statement, which on properties costing in excess of £1.5 million (mostly to be found in Central London) increased stamp duty from 5% (under £2 million) or 7% (over £2 million) to 12%. The consequence of this increase in tax rates was a reduction in demand for the high value properties in Central London, resulting in prices in the inner boroughs falling (see London analysis on Page 9). From January 2015 onwards, the effect of these Central London falls has been to bring down the rate of house price growth for the country as a whole. This effect reached a maximum (to date) in November 2015, when the difference amounted to 1.4%, that is we reported an increase of prices for the country as whole of 5.9%, which would have been 7.3% had we excluded Central London.

12.0

Annual % change in house prices

10.0

8.0

6.0

4.0

2.0

0.0

Annual House Price Growth, including and excluding

Central London

Including Central

London

Excluding Central London

Figure 1. The Annual Rate of House Price Growth in England & Wales by month December 2013 - December 2015, including and excluding Central London link to source Excel

Central London is defined in this analysis as being the 5 London Boroughs of Kensington & Chelsea, City of Westminster, Camden, Hammersmith & Fulham and the City of London.