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Price History

The UK housing market remains weak at below 1% growth.  But with the UK economy on the edge of another recession, the surprise is that the housing market has not fallen more.  And central London is booming.

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UK house prices dropped 0.05% (-2.76% inflation-adjusted) during the year to end-February 2013, to an average of £162,638 (US$246,416), according to Nationwide.   Since the end of 2008, UK house prices have either fallen, or increased minimally.

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But the national figures conceal wide regional house price disparities.   London prices have soared in recent years, and continue rising.



     

 

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From 2009 to 2012, London house prices rose by 8%, based on figures from Halifax. It was followed by South East (5%), East Anglia (4%), South West (2%) and East Midlands (1%).

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High demands from foreign buyers, who own more than 50% of properties in many central London boroughs, continue to fuel the rise. Prime areas – like Chelsea, Westminster, Hammersmith, Camden and Fulham – have a relatively low correlation with the rest of London, let alone the rest of the country, suggesting they really are in a world of their own."

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Kensington and Chelsea, one of London’s most expensive residential boroughs, was the country’s best performing housing market in March 2013, with prices soaring by 15.8% y-o-y to an average of £2,316,256, according to Rightmove.

•     Residential property transactions rose by 5% to 930,000 in 2012 from the previous year, according to the Council of Mortgage Lenders (CML).  The 3,693 units sold in the fourth quarter of 2012 was the highest since the last quarter of 2007.

 

UK house prices have held up relatively well due to four factors:

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Immigration and population growth have been strong, especially in London.
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Interest rates have been at record lows, with a large expansion of the money supply through “quantitative easing”.
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The City of London (London’s financial centre) continues to boom.
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Construction activity remains very weak. The output of new private houses fell 4.5% to £13.36 billion (US$20.24 billion) in 2012, according to Office for National Statistics (ONS).  Construction of new public housing dropped 18.7% to £3.6 billion (US$5.45 billion).


No interest rate hike

•              Expectations for a rise in the Bank of England’s (BoE) base rate to 0.75% did not materialize, as the BoE decided to keep its record low base rate of 0.5%, in place since July 2011, despite an inflation rate twice the 2% target till December 2011.
•  The Bank of England’s (BoE) key rate has remained unchanged at 0.5% for the past three years. It is the lowest rate in the BoE’s history. The rate is forecast to remain unchanged up to 2015,


From boom to doom

In UK property prices peaked in Q3 2007, after huge rises from 1996-2007:

•        Prices in Northern Ireland rose by 458.6% from Q3 1996 to Q3 2007 (361% in real terms), the highest rise among all the UK regions
Prices in London rose 310% (238% in real terms) during this period.
•    The national index rose 259% (196% in real terms) over the same period (all figures from Nationwide).

 

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In early 2007 interest rates were raised, and lending conditions tightened. House price falls accelerated in H2-2008, due to the global financial meltdown and the economic recession.

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The biggest drop occurred in Northern Ireland where house prices fell by 39.8% (-42% real) during the year to Q1 2009. House price falls in other regions ranged from 14.1% (-17.85 real) for Scotland, and 25% (-21.7 real) in East Anglia. London house prices dropped by 19.8% (-23% in real terms).

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House prices averaged £247,058 (€297,069) in Outer Metropolitan London, and £198,363 (€238,517) in the Outer South East.

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The region with the most significant annual price increase is London with a movement of 6.9 per cent.

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The region with the greatest annual price fall is the North East with a movement of -3.8 per cent.

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London also saw the greatest monthly price rise with a movement of 3.1 per cent

 

Source: Land Registry, House Price Index, June 2013


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