After years of fast rising house prices many experts have been predicting a sharp fall in prices for some time. So let’s take a look at the latest house price statistics, and what we can learn from them.
There are, of course, several house price indices published every month which are each compiled from different data in a different way. Here we’ll look at the UK House Price Index (UK HPI) which is calculated by the Office for National Statistics using data from actual house sales completed, usually, a couple of months previously.
Are house prices falling at last?
On the basis of the latest statistics the answer is yes, no or maybe!
House prices in the UK are still rising on an annual basis but falling on a monthly basis, but only by a very small amount.
In February 2023 the average price of a property in the UK overall was £287,506. On an annual basis property prices rose by 5.5%. On a monthly basis prices fell by 1% compared to the previous month. This continued a broader trend for significant annual rises but small monthly falls.
Price changes are different across the countries of the UK
It’s important to recognise that national average prices disguise what is going on in different countries, and different areas, of the UK.
In Northern Ireland house prices increased by a substantial 10.2% annually and decreased 0.5% over the month. (NI figures are based on the last quarter of 2022.)
In Wales house prices increased by 6.4% annually and decreased 0.6% over the month.
In England house prices increased by 6% annually and decreased 0.8% over the month.
In Scotland house prices increased by just 1% annually and decreased 2.6% over the month.
Price changes …. how they vary in different areas
Now let’s focus on property price changes in different regions of England. (The HPI gives prices for different parts of the other countries too but some of these have only small transaction volumes making it difficult to see clear trends.)
The West Midlands took top spot in the annual league table. This region saw the highest annual price rises. Here prices rose 8.6% annually with a very small fall of 0.4% monthly.
The North East saw the second highest annual rise at 7.6% but also the highest monthly fall at 2.3%.
Close behind the East Midlands took third place in the annual league table with a 7.4% rise but there prices only fell 1.1% monthly.
The North West saw a 7% annual price rise and a 0.6% monthly fall.
The South East and the South West saw identical annual price rises of 5.8% and identical monthly falls of 1.2%. This is perhaps an odd coincidence particularly as they are both quite different property markets, with the average price in the South East being around £70,000 higher than in the South West.
The East of England came just behind with a 5.6% annual rise and a negligible 0.1% monthly fall.
Yorkshire and The Humber came next with a 5.5% annual increase in the average property price. Prices here were also unchanged over the month.
London came bottom of the annual price league table. Average prices in London increased just 2.9% over the year – only about half as much as any other region. London also saw a monthly fall of 1.1%.
So what can we learn?
Some people might say that we can’t learn all that much about what is going on in the property market, at least not yet.
Some experts have been predicting significant price falls for some months. But these do not seem to be happening just yet. In fact, some of the annual rises are pretty impressive in the circumstances at 5-8% plus. In a normal year for the property market, let alone in a period with rising interest rates and a turbulent economy, they would be considered pretty good.
While the trend for monthly property price falls seems to be gathering pace – and it could be said that these monthly falls will contribute to an annual fall in property prices before too long – these falls are pretty small in the scheme of things.
Across the country trends are pretty much similar to historical trends, ie. first up, first down. The places where property prices historically tend to rise first, and most, in a property price boom – ie. London – are seeing a more subdued market. Places where property prices take longer to start rising, such as the Midlands, north of England and Wales still seem to have fairly buoyant markets. (Scotland seems to be the exception to the rule on this occasion.) The regions in between such as the east tend to be more stable.
The West Midlands could be said to be something of a market to watch at the moment. Historically the West Midlands property market is more like that in the north than in the south. At the moment, however, it seems to be bucking the trend – annual price rises are still impressive and the monthly fall last month was still minimal.