Is this the end of Britain’s booming housing market? Home prices in London fall at their fastest rate since 2009 (but it still costs £500K to get on the property ladder in the capital)
- Average house prices in the UK increased by 3 per cent in the year to June
- The average UK house price was £228,000 in June – £6,000 higher than in 2017
- Price of new build properties shot up in 2018 by 9.6 per cent to £294,070
House prices in London have fallen at their fastest rate since 2009 amid growing signs Britain’s booming property market is finally cooling down.
Average house prices across the UK grew at 3 per cent in the year ending in June – the slowest rate since August 2013, figures released by the Office for National Statistics today who.
And in London house prices actually fell by 0.7 per cent – the biggest tumble since September 2009 when the country was reeling from the global financial meltdown.
But house prices in the capital are still some of the highest in the world with the average home costing £477,000.
London’s property market has long been seen as a safe investment, fuelling a massive rise in prices partly driven by big-money foreign investors.
The news will alarm house buyers who have recently taken out hefty mortgages to pay for their properties.
But the news will be welcomed by Millennials and other people who have not been able to get their foot on the property ladder as prices have sky-rocketed.
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London property prices have slowed down and fallen since the country backed Brexit in the EU referendum in June 2016.
Experts said increases in mortgage rates have made borrowing harder for many.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: ‘Increases in mortgage rates have restricted the amount that home-buyers are willing and able to borrow.
INFLATION RISES FOR THE FIRST TIME SINCE NOVEMBER
Inflation rose last month, largely due to higher transport costs, new official figures show.
The Consumer Price Index rose to 2.5 per cent in July, up from 2.4 per cent in June, the first rise recorded since November 2017, said the Office for National Statistics.
Mike Hardie, head of inflation at the ONS, said: ‘Transport tickets and fuel, along with often erratic computer game prices, drove up costs for consumers.
‘On the other hand, there was a drop in prices for women’s clothing and footwear, and some financial services.’
‘Prices in the capital are more sensitive to changes in mortgage rates than elsewhere, because loan-to-income ratios are extremely high.
‘The reduction in jobseekers from the EU, due to Brexit, also has hit demand in the capital.’
The price of a typical UK house is now around £228,400, a £1,000 increase on the previous month.
The strongest performer was the West Midlands, which experienced house price growth of 5.8 per cent.
Howard Archer, chief economic advisor at the EY Item Club, said: ‘The impression remains that the housing market is struggling to really step up a gear in the face of still limited consumer purchasing power, fragile confidence and expectations of the Bank of England edging up interest rates (which it duly did at the August MPC meeting).
‘There seems little evidence that the cutting of stamp duty for first-time buyers in last November’s budget has provided a significant boost to housing market activity.’
In England, house prices increased by 2.7 per cent over the year to June, taking the average property value there to £245,000.
Wales saw average house prices increase by 4.3 per cent over the previous 12 months to stand at £157,000.
Annual house price rates of change, 2006 to June 2018. Source – Office of National Statistics
Average UK house prices, January 2005 to June 2018. Source – Office of National Statistics
In Scotland, the average price increased by 4.8 per cent over the year to reach £150,000.
The average price in Northern Ireland was £133,000, marking an increase of 4.4 per cent over the year.
Shaun Church, director at mortgage broker Private Finance said: ‘A slight correction in house prices is no bad thing for the UK property market.
Years of steady house price hikes have created huge affordability issues for first-time buyers, so the fact that annual house price growth has fallen to its lowest point in five years will be a welcome change for many.
‘However, the figures for June show that the price of new build properties shot up 9.6 per cent on an annual basis to £294,070, 3.8 per cent higher than in the previous month.
Estate agent Lee James Pendleton said: ‘The most troubling numbers here are easily the growth figures for new builds.
‘That market is still raging like a furnace and the resulting annual growth figure is calling out the popularity of the Help to Buy scheme.
‘It’s true that new builds only account for a relatively small number of transactions but such strong numbers do skew the overall picture and raise concerns about the value for money those using the scheme are getting.
‘The 9.6 per cent house price growth for new builds is in marked contrast to the cost of homes bought by first-time buyers which have only risen 2.8 per cent over the past year.
Average house prices by English region, 2004 – 2018. Source – Office of National Statistics
‘The big question is what happens to prices when the property market’s own version of Quantitative Easing is taken away?’
By property type, semi-detached houses showed the biggest increase, rising by 4.4 per cent in the year to June 2018 to £216,000.
The average price of flats and maisonettes increased by 0.5 per cent in the year to June 2018, to £204,000, the lowest annual growth of all property types.
While it is taking buyers longer to complete on their homes from 16 weeks last year to 18 weeks on average.
Property transaction statistics for June show that on a seasonally adjusted basis, the number of transactions on residential properties with a value of £40,000 or greater was 96,340.
This is 5.7 per cent lower than in the same month last year, an between May and June 2018, transactions fell by 3 per cent.
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