09 April 2018

Annual house price growth remained subdued in March

  • UK annual house price growth steady at 2.1%

  • London again weakest performing region, with house prices down 1% year-on-year

UK house price growth remained broadly stable in March at 2.1%, little changed from the 2.2% recorded the previous month. House prices fell by 0.2% over the month, after taking account of seasonal factors.

On the surface, the relatively subdued pace of house price growth appears at odds with recent healthy rates of employment growth, a modest pick-up in wage growth and historically low borrowing costs. However, consumer confidence has remained subdued, due to the ongoing squeeze on household finances as wage growth continues to lag behind increases in the cost of living.

Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year.

But historically low unemployment and mortgage interest rates together with the lack of properties on the market is likely to provide some support for house prices. Overall, we expect house prices to be broadly flat, with a marginal gain of around 1% over the course of 2018.

Northern Ireland leads house price growth in first quarter

Northern Ireland saw the strongest annual rate of growth, with a substantial 7.9% gain, though prices in the region are still furthest below their pre-crisis levels, some 38% below their 2007 levels, while overall UK prices are 16% above.

Wales also recorded a pick-up in house price growth, with a 6.1% year-on-year increase, the highest since 2014. England recorded annual house price growth of 1.9%. Amongst the home nations, only Scotland saw weaker price growth than England, with prices up just 0.2% compared to the same period of last year.

England, Wales, Northern Ireland and Scotland annual house price growth graph

North-South divide narrows……a little

For the fourth quarter in a row, regions in the North of England recorded stronger annual house price growth than those in the South.

Over the past two years the Southern English regions have seen a steady deceleration in price growth, which is now running at its slowest pace since 2012. By contrast, the Northern English regions have recorded a gradual acceleration and recorded their strongest growth rate since 2014 in the first three months of this year (see chart below).

North and South annual house price growth graph

However, these trends have so far made only small inroads in narrowing the North-South divide. House prices in the North of England are, on average, still less than half of those prevailing in the South (see chart). A typical house in the North of England now costs £163,138, compared to £331,047 in the South.

North as % of South house prices graph

England: home ownership rates have declined

Average house prices in England increased by 0.9% in the first quarter of 2018 and were up 1.9% year-on-year.

Home ownership rates have declined across all English regions over the past decade. While the decline has been fairly uniform across regions, the biggest reduction has been in London, where the home ownership rate has fallen from 57% to 47%. The counterpart to this has been robust growth in the private rental sector; for example, 30% of households in London now rent.

Home ownership rate graph

However, house price developments since 2007 have been much more varied. London has seen modest price falls in recent quarters, though it outperformed all other regions by a significant margin over the past decade, with prices currently 57% above 2007 levels (see chart below).

Regional house prices versus peak 2007 graph

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About the author

Robert Gardner

Robert Gardner is Nationwide’s Chief Economist, leading a team which provides economic analysis and advice, focused on developments in the UK economy, with particular emphasis on the housing market and house prices.

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