1. Main points

UK house prices increased by 7.6% in the year to February 2016, down from 7.9% in the year to January 2016.

House price annual inflation was 8.2% in England, 2.8% in Wales, -0.8% in Scotland and 2.4% in Northern Ireland.

Annual house price increases in England were driven by an annual increase in the South East (11.4%), the East (10.3%) and London (9.7%).

Excluding London and the South East, UK house prices increased by 5.0% in the 12 months to February 2016.

On a seasonally adjusted basis, average house prices increased by 0.4% between January 2016 and February 2016.

In February 2016, prices paid by first-time buyers were 8.0% higher on average than in February 2015.

For owner-occupiers (existing owners), prices increased by 7.4% for the same period.

UK average mix-adjusted house price in February 2016 was £284,000.

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2. About this statistical bulletin

The Office for National Statistics (ONS) House Price Index (HPI), previously published by the Department for Communities and Local Government (DCLG), is a monthly release that publishes figures for mix-adjusted average house prices and house price indices for the UK, its component countries and regions.

The index is calculated using mortgage financed transactions that are collected via the regulated mortgage survey by the Council of Mortgage Lenders. These cover the majority of mortgage lenders in the UK. The HPI complements other measures of inflation published by us such as the consumer price indices, the producer price indices and the services producer price indices.

This statistical bulletin provides comprehensive information on the change in house prices on a monthly and annual basis. It also includes analysis by country, region, type of buyer (first-time buyers and former owner-occupiers) and type of dwelling (new dwelling or pre-owned dwelling). Historical series for all accompanying tables that transferred from DCLG are also available in the data section of this release.

The figures published in this release are not seasonally adjusted unless otherwise stated.

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3. House price index UK summary

UK average house prices increased by 7.6% over the year to February 2016, down from 7.9% in the year to January 2016 (Figure 1). The average UK mix-adjusted house price in February 2016 was £284,000.

In February 2016, the UK mix-adjusted house price index decreased by 0.8% on January 2016 to 222.2 (Figure 2). The UK index is 19.8% higher than the pre-economic downturn peak of 185.5 in January 2008.

On a seasonally adjusted basis, average house prices increased by 0.4% between January 2016 and February 2016, compared with an increase of 0.8% in average prices during the same period a year earlier.

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4. House price index by country

During the year to February 2016, average house prices increased by 8.2% in England (down from 8.6% in the year to January 2016), 2.8% in Wales (up from -0.3%) and 2.4% in Northern Ireland (up from 0.8%). There was a 0.8% decrease in average house prices in Scotland (down from a 0.1% increase in the year to January 2016).

The main movements for each country are:

  • the index for England in February 2016 (221.1) is 0.7% lower than in January 2016 (222.8) (Figure 4) and is 22.3% higher than the pre-economic downturn peak in January 2008 (180.8)
  • the index for Wales in February 2016 was 224.9 – this is 0.4% higher than in January 2016 (224.0) and is 1.3% higher than the pre-economic downturn peak of January 2008 (222.1)
  • the index for Scotland in February 2016 (224.3) is 7.8% below the record level witnessed in March 2015 (243.2) – Scotland prices are now 2.7% below the pre-economic downturn peak of June 2008 (230.6)
  • the index for Northern Ireland in February 2016 (164.7) is 41.5% below the peak of August 2007 (281.5)

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5. House price index by region

The pace of annual house price growth was again varied across the 9 English regions in February 2016 (Figure 5). The largest annual increase was in the South East at 11.4% (down from 11.7% in the year to January 2016) followed by the East (10.3% increase in the year to February 2016, up from 9.8% in the year to January 2016). The North East continues to have the lowest annual growth of the 9 regions, with prices increasing 1.4% in the year to February 2016 (up from 0.9% in the year to January 2016).

Excluding London and the South East, UK house prices increased by 5.0% over the year to February 2016, down from 5.1% in the year to January 2016.

This month, average house prices in 2 of the 9 English regions are at record levels (Figure 6). The North East is the only English region yet to surpass its pre-economic downturn peak (prices in the North East remain 3.4% below the peak of January 2008).

The main regional price index movements for February 2016 are:

  • the price index for the East reached a record high of 211.8 in February 2016 – this is up 1.3% on the previous record in January 2016 (209.1) and 25.8% higher than the pre-economic downturn peak of January 2008 (168.4)
  • the price index for the South West reached a record high of 199.9 in February 2016 – this is up 0.9% on the previous record in September 2015 (198.2) and 11.1% higher than the pre-economic downturn peak of January 2008 (179.9)
  • the 7 remaining regions fell back from the record levels witnessed in previous months, the most notable being London where the index fell by 2.8% to 260.0 in February 2016 (down from 267.6 in January 2016) and the North West, which fell by 1.5% to 210.1 (down from 213.4 in January 2016)

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6. Average house prices in countries and regions

Average mix-adjusted house prices in February 2016 stood at £298,000 in England, £173,000 in Wales, £189,000 in Scotland and £157,000 in Northern Ireland (Figure 7).

In February 2016, London continued to be the English region with the highest average house price at £524,000 and the North East had the lowest average house price at £158,000. London, the South East and the East all had prices higher than the UK average price of £284,000.

Excluding London and the South East, the average UK mix-adjusted house price was £216,000.

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7. House price index by type of buyer

The average price for properties bought by first-time buyers increased by 8.0% over the year to February 2016, up from an increase of 7.7% in the year to January 2016 (Figure 8). In February 2016, the average price paid for a house by a first-time buyer was £214,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 7.4% in the year to February 2016, down from an increase of 8.0% in the year to January 2016. In February 2016, the average price paid for a house by a former owner-occupier was £336,000.

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8. House price index by new and pre-owned dwellings

During the year to February 2016, prices paid for new dwellings increased by 9.3% on average, compared with an increase of 8.3% in the year to January 2016 (Figure 9). The average UK house price for new dwellings in February 2016 was £281,000.

During the year to February 2016, prices paid for pre-owned dwellings increased by 7.5% on average, compared with an increase of 7.9% in the year to January 2016. The average UK house price for pre-owned dwellings in February 2016 was £284,000.

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9. Development of a single, official house price index – progress update

The methodology for the new House Price Index (HPI) has now been finalised and is presented in the article Development of a single Official House Price Index, published in February 2016.

Early historic estimates for the new official UK House Price Index were presented in the article Introducing the single official House Price Index, published in March 2016. The new UK HPI will be published in its entirety in June 2016 and then monthly thereafter, replacing the existing house price indices currently published by the Office for National Statistics and Land Registry for England and Wales.

For further information, please email: hpi@ons.gsi.gov.uk

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10. Economic context – February 2016

House prices continued to grow robustly in the year to February 2016. House prices grew at a rate of 7.6% in the 12 months to February 2016, a slight fall compared to the 7.9% rate in January 2016. On a monthly (seasonally adjusted) basis, prices increased by 0.4% between January and February 2016. House prices have now been growing since early 2012 and in February 2016 were 24.1% higher than their average level in 2007, before the economic downturn. The fall in the 12-month rate in February 2016 was partly driven by the North West, where prices increased by 2.1%, down from 5.0% in January 2016, and Yorkshire and the Humber, where prices increased by 1.5%, down from 3.8% in January. UK price growth of 7.6% in the year to February 2016 was lower than the average rate in 2014 as a whole which was 10.0%.

The continuing upward price pressures in the housing market may be a result of a shortage of supply and robust demand: a view supported by a number of house market indicators. There continues to be weak supply in the market, with the Bank of England’s Agents’ Summary of Business Conditions for February 2016 reporting that housing activity remained subdued relative to pre-crisis levels, constrained by a shortage of properties for sale. Despite the substantial rise in house prices, the ONS Output in the Construction Industry release indicated that new-build housing output increased 0.6% in the previous 3 months (Nov to Jan) compared to the same period a year earlier. The latest data from the Royal Institution of Chartered Surveyors also suggests that supply has increased modestly in the last 3 months following 10 months of consecutive falls.

While supply has been limited, demand for house purchases remains strong. The volume of mortgage approvals - a leading indicator of housing purchases - grew by 22.0% in the year to February 2016. The number of UK home sales also continued to grow in the 3 months to February (Dec to Feb): rising by 4.0% relative to the preceding 3 months (Sep to Nov). Data from the Royal Institution of Chartered Surveyors (RICS) also suggests buyer demand increased in February 2016 and has outstripped supply for 13 successive months.

Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing by 0.6% in the fourth quarter (Oct to Dec) of 2015, a slightly faster rate than in Quarter 3 (July to Sept) 2015. Labour market conditions have continued to strengthen, as unemployment fell to 5.1% for the 3 months to January 2016: the lowest rate since the 3 months to October 2005. Annual pay growth also strengthened in 2015 compared to 2014, although the rate of this growth has eased in recent months. These improvements, along with falls in the inactivity rate and broader evidence of tightening, suggest confidence in labour market outcomes remains high. However, house price growth continues to outpace real earnings growth considerably, despite the improvements in nominal pay growth over the past year and low inflation.

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11. Datasets

The HPI monthly and quarterly datasets provides full historical series for the monthly tables accompanying the house price index statistical bulletin. This month, Tables 1 to 9 have been updated with the latest monthly estimates for February 2016. The seasonally adjusted figures in Table 7 have been revised this month as scheduled.

The HPI annual dataset contains all the annual live tables. No annual tables have been updated this month. The next set of updates to annual tables will be in July 2016.

The HPI weights summary datasets provide a summary of the aggregated mix-adjustment weights used in the production of the HPI for the period 2007 to 2016. The mix-adjustment weights are updated in the February HPI each year. This month, the table has been updated with data for 2016.

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12. How are we doing?

We would welcome your views on the data presented in this statistical bulletin. Please contact the house price index team using the email address below to discuss any aspect of the data, including your views on how we can improve the data.

hpi@ons.gsi.gov.uk

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13 .Background notes

  1. New this month

    New house price data for February 2016 are published this month. The monthly datasets have been updated to include data for February 2016.

    Revisions this month

    New mix-adjustment index weights for 2016 have been implemented in this release as scheduled. This update of the weights has revised the January 2016 mix-adjusted prices. For further details on the annual update of weights, please see the “re-weighting” section below.

    There are small revisions to the seasonally adjusted series for the last 12 months, which are expected from the monthly seasonal adjustment process.

    Revisions next month

    Small revisions are expected next month for the January and February 2016 HPI figures as scheduled. These reflect quarterly submissions delivered by a small proportion of mortgage lenders.

  2. Relevance of the ONS House Price Index

    The ONS HPI is an important measure of house price inflation for the UK and together with the Land Registry HPI, it is one of the main house price indices used by central and local government to support decision making in the UK. Other users include private individuals, surveyors and analysts in financial institutions.

    The ONS HPI is an important input into the housing cost component of RPIJ and RPI retail price indices. Each month a customised HPI delivery is produced using a sub-sample of the full data set for use in RPIJ and RPI.

  3. Revisions policy

    At the end of every quarter, as well as releasing final figures for the latest month, we revise the figures from the previous 2 months. This is done because some mortgage lenders, which account for 1 to 2% of all records, provide their data on a quarterly rather than monthly basis.

    Additionally, data will be revised for the previous month if more than 1,000 additional cases are received in a subsequent month.

    In July 2013, the methodology used to seasonally adjust the HPI was updated following a review and brings the HPI in line with our best practice for seasonal adjustment. Seasonal factors are now estimated on a monthly basis and therefore may result in small revisions to the previous 12 months data. This updated process improves the accuracy of the seasonally adjusted figures.

    Other revisions to historical data (other than those currently due for revision) will be made only if the revision is substantial.

    In all cases, the revised figures are labelled with an “R” and the reason for the revision explained under the “New this month” section of the background notes.

  4. Methodology

    Data sources

    Since December 2005 the ONS HPI (formerly the DCLG HPI) has been based on a sample of mortgage completions data from the Regulated Mortgage Survey (RMS) as collected by the Council of Mortgage Lenders (CML).

    The number of transactions received from the RMS is affected by the total number of mortgages completed for house purchase in any period. During 2011 the sample covered 65 to 70% of all UK mortgage completions.

    Quality

    A Quality and Methodology Information (QMI) report for the HPI describes in detail the intended uses of the statistics presented in this publication, their general quality and the methods used to produce them.

    Price methodology

    The ONS HPI is mix-adjusted to allow for differences between houses sold (for example type, number of rooms, location) in different months within a year. House prices are modelled using a combination of characteristics to produce a model containing around 100,000 cells (one such cell could be first-time buyer, old dwelling, one bedroom flat purchased in London). Each month estimated prices for all cells are produced by the model and then combined with their appropriate weight to produce mix-adjusted average prices. The index values are based on growth rates in the mix-adjusted average house prices and are annually chain-linked. More information on the model used is available via the hedonic model methodology paper published on the HPI user guidance webpage.

    Re-weighting

    The ONS HPI is a weighted Laspeyres-type index. In January of each year the index weights are updated based on the relative numbers of transactions during the previous 3 years, which are grossed to total transactions obtained from Land Registry. Applying new weights ensures that the index keeps up to date with changes in the types of properties that are being purchased, and therefore reflects the price of the average property. A high level summary of the weights used in the calculation of the ONS HPI can be found in the HPI weights summary dataset.

    One consequence of changing the weights every year is that the mix-adjusted house prices cannot be compared between years as the weights are different. The index itself is constructed on a chain-linked basis, which enables year-on-year comparisons to be made. This means that the year-on-year change in the index for June 2011, say, is effectively the change in the average price from June to January 2011 (using the weights for 2010) combined with the change in the average price from January to June 2011 using the weights for 2011. Therefore, the year- on-year change in the index is not the same as the year-on-year change in the mix-adjusted average price. More information on the HPI methodology is available on the GOV.UK website.

    Seasonal adjustment

    The housing market shows seasonal effects that affect house prices. For example, prices have tended to be higher during the summer months than during the winter months. These seasonal effects are estimated and adjusted for in order to calculate month-on-month price changes. Seasonally adjusted figures are provided at a national level in Table 7 alongside the non-seasonally adjusted figures of the other tables. Seasonal adjustment is performed each month and reviewed each year, using the standard and widely used software X-13-ARIMA. Seasonally adjusted house price estimates are used to report monthly percentage changes. All other figures such as annual rates of change and average house prices are based on non- seasonally adjusted estimates, unless otherwise stated.

  5. Other house price statistics

    Currently there are a number of different sources of house price statistics published in addition to the ONS HPI. There will be differences in the data published by each source as there are differences in both the data and methodology used. Therefore the ONS HPI is not directly comparable with these other indicators. Further details on the differences between official house price statistics can be found in the article Official House Price Statistics Explained.

    Land Registry house price index

    All residential property transactions in England and Wales are recorded by Land Registry. These transactions are used for calculating the Land Registry index. This index is based on repeat- sales regression, which calculates the change in price of any property transacted twice since 1995. Therefore new build properties are excluded from the index. Land Registry publishes indices at a sub-regional level. The Land Registry HPI is normally published on the 20th working day of every month, and refers to all transactions of the preceding month.

    The Land Registry HPI can be accessed via the Land Registry's website.

    Registers of Scotland official quarterly housing market statistics

    Registers of Scotland records all the property transactions in Scotland. It produces average house prices based on arithmetic means of these transactions, which is published as the quarterly housing market statistics in the second month after the month to which the figures refer to.

    Northern Ireland residential property price index

    The Land and Property Services assisted by the Northern Ireland Statistics and Research Agency (NISRA) publish a quarterly residential property prices index (RPPI) for Northern Ireland. The index measures change in the price of residential property sales recorded by Her Majesty's Revenue and Customs. This is a new official statistic, first published in Quarter 1 of 2012.

    Halifax house price index and Nationwide house price index

    Both Halifax and Nationwide produce house price indices based on their own mortgage approvals only and therefore, like the ONS HPI, will not include any cash transactions. They both have UK-wide coverage, and since the Halifax and Nationwide use only their own in-house data they can process them immediately and do not have to await the receipt of data from other lenders. This means that they are more timely than the ONS HPI.

    LSL Acadata house price index

    The LSL Acadata (previously the LSL Property Services/Acadametrics) HPI is the only house price index to reflect all transactions, as opposed to data samples, and provides mix and seasonally adjusted results at national, regional and county or unitary district or London borough levels. The index can be accessed at Acadata.

  6. Accessibility

    This bulletin includes the February 2016 data. Future publication dates for this statistical bulletin are available via the release calendar.

  7. Code of Practice for Official Statistics

    Details of the policy governing the release of new data are available from the UK Statistics Authority.

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Contact details for this Statistical bulletin

Rhys Lewis
hpi@ons.gsi.gov.uk
Telephone: +44 (0)1633 456400