This short story has been written as part of a collaboration between University of Swansea student Shane O’Connor and the Office for National Statistics.
House prices in the UK had been on an upward trend prior to January 2008, when the mix-adjusted average UK house price was 85.5% higher than its value in February 2002. The average house price then fell over the course of 2008-09 to give an index value in March 2009 that was similar to that in April 2006. Following a resumption of the upward trend for the average house price from mid-2009 to late 2010, the average house price became broadly flat for around 13 months; the index remained around 173 between October 2011 and May 2012. An upward trend then began to re-emerge from 2012 onwards with the index surpassing the previous peak in August 2013. Figure 1 highlights these trends in house prices.
Looking at the 12 months to December 2013, the average house price was 5.5% higher compared with December 2012. The rate of annual growth in the average UK house price also increased over the course of the year, from 1.9% in February. However, these data mask the regional differences in house prices across the UK, as the change in house prices can differ greatly from region to region.
London prices rose at twice the rate of the UK average in the year to December 2013
The recent sustained increase in house prices has been mainly supported by prices in London, which increased by 12.3% over the 12 months to December 2013. This was more than double the UK average house price increase over that period. The London region has the second biggest weight of all the regions in the House Price Index of 14.3%, after the South East of England (16.7%) but above Eastern England (11.0%). Therefore the larger increases in London prices will increase the UK average and is only partially off-set by slower house price growth elsewhere, such as Scotland, Yorkshire & Humber and the East Midlands, as shown in Figure 2.
With the exception of England – which is affected by London – all other UK countries are below the UK average; this gives some idea of the magnitude of the effect London has on the UK average. Excluding London and the South East, UK house prices have only increased by 3.1% over this period.
House prices in London have not always increased at a rate faster than the UK average
Prior to the 2008-09 economic downturn, the rate of change of house prices had a very different composition regionally. House prices in London increased by the slowest rate across all the regions in most months from January 2003 to September 2005. This is shown in Figure 3 where the mix-adjusted London house price index was below the swathe of price indices per region across the UK.
Between September 2002 and September 2005, the mix-adjusted house price index for London increased from 117.5 to 134.3, an increase of 14.3%, whereas the mix-adjusted index for the UK increased from 118.2 to 154.0, an increase of 30.3%. The rate of annual house price growth for London averaged 6.5% per month between February 2003 and September 2005. This compares with average annual growth of 11.5% per month across the UK. Therefore, house prices in London grew at just over half the rate of UK house prices. However, this period of slower London house price increases was followed by stronger increases leading into the economic downturn.
Following the downturn, housing prices in London continued to increase at a faster rate than the rest of the UK, ultimately giving London the fastest growing house prices of all UK regions by the end of 2013. It can also be seen that house prices tended to be flat across all regions from mid-2010 onwards. However, for London this lasted until early 2011 before prices started to increase, whereas it took until the end of 2012 for house prices in other regions to begin an upward trend.
Where can I find out more about UK House Prices?
These statistics are based on mix-adjusted house prices as published in Table 1 of the monthly ONS House Price Index Statistical Bulletin. If you have any comments or suggestions, we’d like to hear them. Please email us at: email@example.com.