House prices hit new highs in May despite slower growth
- Average house prices in England and Wales at new high of £277,178 – fourth price record set this year
- Monthly property price growth picks up to 0.4% – but still only a third of what it was a year ago
- London knocked into fourth place in regional rankings of growth, and price rises accelerating in North
- Home values in Kensington & Chelsea now 16% below autumn 2014 peak, as higher stamp duty bites
- Home sales in May down 14% year-on-year, as lack of supply suppresses housing market activity
Adrian Gill, director of Reeds Rains estate agents, comments: “The melody of growth has slowed, with monthly house price rises now just a third of what they were a year ago. Property values received a 0.4% boost in May 2015, compared to 1.2% at the same point twelve months ago. But the property market is still hitting the high notes – with the average home in England and Wales currently worth £277,178. This is the fourth new record for property values this year as the recovery strives on, and monthly price rises are strengthening. In April we made another breakthrough, with property values across more than half of the unitary authorities/county areas of England and Wales now past their pre-recession peaks.
“There are only four outstanding regions across the country where house prices are still dallying below 2007/2008 benchmarks, but the good news is that the tide is going in the right direction. It is those areas which have most catching-up to do, and where price increases have typically been smaller, where growth is now accelerating. For instance, while average property values in the North are still 4% lower than during the pre-crisis years, this region has experienced the fastest increase in the rate of annual growth recently – ramping up from 2.3% in March to 3.6% in April, as the balance tips in the favour of regions which need a helping hand. Price rises in the North West, South West, and East Midlands are also on the up, at the same time that growth in London is waning. This has knocked the capital back into fourth position in the rankings of regional house price growth over the past twelve months, with the annual rise in London estimated to now be less than 12% of what it was in the heat of July last year – 2.4% in May 2015, down from 20.7% in the summer of 2014.
“On a monthly basis, London house prices have dropped for the third successive month since the start of the year. It is the higher-priced boroughs which have seen the biggest price falls, as a side effect of costlier stamp duty on top-end properties. For instance, home values in Kensington and Chelsea – the most expensive London borough – have dropped 6.0% in the past year, and are now 16% below their peak in September 2014. This falloff at the top tiers of the market has cooled activity levels too. Home sales in London have dropped 16% year-on-year in the three months to April 2015 – the most significant drop-off of all regions. But this belies a much more dynamic market at the lower end. The cheapest areas of the capital are seeing double-digit house price increases, and property values in Newham, Bexley and Barking & Dagenham reached new records in April, as the pace of growth accelerates at the bottom rungs of the ladder.
“Overall, completed house sales in England and Wales have risen 10% since April, to total 67,300 in May. But this still represents a 14% drop compared to a year ago. In the short-term, the General Election did ruffle some feathers, but as we return to smoother ground, it’s becoming clear that there’s a more structural problem holding back the market – and that the lack of properties on the market is starting to choke off activity. This will need urgently addressing, as with the current momentum in the economy, and the government pumping up demand via commitments to starter homes and support for first-time buyers; price rises will only speed up if housing supply doesn’t put pedal to metal.”