UK House Price Index: June 2015

• UK house prices increased by 5.7% in the year to June 2015, up from 5.6% in the year to May 2015.
• House price annual inflation was 6.1% in England, 0.8% in Wales, 9.0% in Northern Ireland and -0.6% in Scotland.
• Annual house price increases in England were driven by an annual increase in the East (9.2%) and the South East (7.7%).
• Excluding London and the South East, UK house prices increased by 5.2% in the 12 months to June 2015.
• On a seasonally adjusted basis, average house prices increased by 0.4% between May and June 2015.
• In June 2015, prices paid by first-time buyers were 5.1% higher on average than in June 2014. For owner-occupiers (existing owners), prices increased by 6.0% for the same period.

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.

UK average house prices increased by 5.7% over the year to June 2015, up from an increase of 5.6% in the year to May 2015 (Figure 1). The average UK mix-adjusted house price in June 2015 was £277,000.

In June 2015, the UK mix-adjusted house price index increased to a record level of 212.6, which is 1.2% higher than the previous record level witnessed in May 2015 (Figure 2). The UK index is now 14.6% 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 May and June 2015, compared to an increase of 0.3% in average prices during the same period a year earlier.

During the year to June 2015, average house prices increased 6.1% in England (up from 5.8% in the year to May 2015), 0.8% in Wales (down from 2.7%) and 9.0% in Northern Ireland (down from 11.0%). House prices fell 0.6% in Scotland over the last 12 months (down from 2.2%). This is the first annual fall in Scotland prices since September 2013.

The England house price index remained at a record level in June 2015 (Figure 4).

The index for England reached 211.0 in June 2015. This is 1.3% above the previous record level in May 2015 (208.2) and 16.7% higher than the pre-economic downturn peak in January 2008 of 180.8. The index for Scotland (225.7) in June 2015 is 7.2% below the record level witnessed in March 2015 (243.2). Scotland prices are now 2.1% below the pre-economic downturn peak of June 2008 (230.6). The index for Wales (216.9) in June 2015 is 3.4% below the record level of 224.6 in January 2015. House prices in Wales are now 2.3% lower than the pre-economic downturn peak of January 2008 (222.1). The index for Northern Ireland (161.4) in June 2015 is 42.7% below the peak of August 2007 (281.5).

The pace of annual house price growth picked up in 6 of the 9 English regions in June 2015 (Figure 5). The largest annual increase was in the East at 9.2% (the same as in the year to May 2015) followed by the South East (7.7% increase in the year to June 2015, down from 8.1%). The lowest growth in June 2015 was in the North East; here prices increased by 2.8% over the year (up from 2.0% in May 2015). London prices increased by 5.3% over the year to June 2015 (up from 4.9% in the year to May 2015).

Excluding London and the South East, UK house prices increased by 5.2% over the year to June 2015, up from 5.0% in the year to May 2015.

This month, average house prices in 6 of the 9 English regions (East Midlands, West Midlands, East, London, South East and South West) are at record levels (Figure 6).

• The price index for the East Midlands reached a record level of 202.8 in June 2015. This is up 1.3% from the previous record level of 200.2 in May 2015. The price index for the East Midlands is 4.8% higher than the pre-economic downturn peak in January 2008 (193.5).

• The price index for the West Midlands reached a record level of 191.6 in June 2015. This is 0.2% higher than the previous record of 191.3 in March 2015. The price index for the West Midlands is now 4.2% higher than the pre-economic downturn peak in January 2008 (183.9).

• The price index for the East reached a record level of 195.8 in June 2015. This is 0.3% higher than the previous record in May 2015 (195.2) and 16.3% higher than the pre-economic downturn peak in January 2008 (168.4).

• The price index for London increased to a record level of 249.1 in June 2015. This is 1.8% higher than the previous record in May 2015 (244.8) and 42.8% higher than the pre-economic downturn peak in January 2008 (174.5).

• The price index for the South East reached a record level of 195.7 in June 2015. This is 1.3% higher than the previous record in April 2015 (193.2) and 17.5% higher than the pre-economic downturn peak in January 2008 (166.5).

• Finally, the price index for the South West reached a record level of 190.9 in June 2015. This is 0.6% higher than the previous record in April 2015 (189.8) and 6.1% higher than the pre-economic downturn peak in January 2008 (179.9).

Average mix-adjusted house prices in June 2015 stood at £290,000 in England, £169,000 in Wales, £154,000 in Northern Ireland and £192,000 in Scotland (Figure 7).

In June 2015, London continued to be the English region with the highest average house price at £513,000 and the North East had the lowest average house price at £156,000. London, the South East and the East all had prices higher than the UK average price of £277,000.

Excluding London and the South East, the average UK mix-adjusted house price was £211,000.

The average price for properties bought by first-time buyers increased by 5.1% over the year to June 2015, up from an increase of 4.8% in May 2015 (Figure 8). In June 2015, the average price paid for a house by a first-time buyer was £213,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 6.0% in the year to June 2015, up from an increase of 5.9% in May 2015. In June 2015, the average price paid for a house by a former owner-occupier was £321,000.

During the year to June 2015, prices paid for new dwellings increased by 9.5% on average, compared with an increase of 10.1% in the year to May 2015 (Figure 9). The average UK house price for new dwellings in June 2015 was £272,000.

During the year to June 2015, prices paid for pre-owned dwellings increased by 5.4% on average, compared with an increase of 5.2% in the year to May 2015. The average UK house price for pre-owned dwellings in June 2015 was £277,000.

Following relatively strong growth during much of 2014, the rate of house price growth appears to have moderated in recent months. Average UK house prices in June 2015 were 5.7% higher than in the same period a year earlier: just 0.1 percentage points higher than the annual rate in May 2015. On a seasonally adjusted basis, prices grew at a slightly weaker monthly rate of 0.4% while the quarterly rate also eased (Figure 10). Despite this moderation, house price growth remains high relative to the movement of prices in general, likely reflecting a mismatch between strong demand and relatively weak supply throughout much of the UK.

Seasonally adjusted house prices (Figure 10) in the 3 months to June 2015 (April-June) were 0.5% higher than in the preceding 3 months (January-March): the slowest quarterly rate since the 3 months to April 2013. This quarterly rate of change is less affected by month-to-month volatility and therefore gives a better indication of the underlying growth in the housing market. Looking at this measure highlights the strength of the market in early and mid-2014 and its softening in the most recent quarters. In Q3 2014, seasonally adjusted house prices grew by 2.7% on Q2 2014 before falling to 1.0% in Q4 2014 and picking up slightly to 1.4% in Q1 2015. The most recent quarterly growth rate of 0.5% therefore continues this broad moderation.

This single headline growth figure masks wide regional variation, with prices falling by 0.6% over the year to June 2015 in Scotland, but rising by 9.0% in Northern Ireland (not seasonally adjusted). Over the past three months, house prices in Northern Ireland have grown faster than any other UK region, continuing the consistently strong pace of growth seen since mid-2014. However, average house prices in Northern Ireland remain the lowest in the UK and are still 42.7% below their pre-downturn peak in August 2007, highlighting the steep falls they experienced between 2008 and 2012. This strong growth in Northern Ireland likely reflects an ongoing mismatch between demand and supply. As the RICS and Ulster Bank Residential Market Survey for Northern Ireland reports for June, increasing number of buyers combined with a limited supply of residential properties have continued to push Northern Ireland house prices higher.

This mismatch is also found in the UK housing market more widely. As highlighted in the Bank of England’s August Inflation Report, demand for house purchases appears strong. The new buyer enquiries balance from RICS’ Residential Market Survey has improved markedly in recent months and, consistent with that reported rise in demand, mortgage approvals for house purchases in Q2 2015 were 8.2% higher than in Q1 2015. Reflecting this growth in demand, UK home sales increased for the second consecutive month in June, rising by 4.7% between May and June to 104,590.

Although demand shows signs of continued strength, supply remains weak. Our output in the construction industry release indicates a 4.6% increase in the volume of house building in the year to June: the lowest annual growth rate since March 2013. The latest RICS’ data shows that new instructions to sell fell in June and that the stock of homes available for sale declined for the third successive month. This combination of well-supported demand and increasingly tight supply continues to support market prices.

Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing by 0.7% in the second quarter of 2015. Labour market conditions have continued to improve, as unemployment remained at 5.6% in the three months to June 2015 and pay continued to increase. Recent weakness in inflationary pressure and a return of real earnings growth has also improved the economic position of households. Households’ income expectations and the availability of credit will affect their decision of whether to purchase a new home: decisions which could have implications for the evolution of house prices.

The HPI monthly and quarterly reference table 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 June 2015. The seasonally adjusted figures in Table 7 have been revised this month as scheduled. This month, tables 10 to 19 have been updated with the latest data for the second quarter of 2015.

The HPI annual reference table 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 March 2016.

The HPI weights summary reference table provides a summary of the aggregated mix-adjustment weights used in the production of the HPI for the period 2007 to 2015. The mix-adjustment weights are updated in the February HPI each year.

We recently published the housing statistics portal. This portal provides users with a platform to access a range of official statistics and analysis on housing.

For further information, please contact HPI@ons.gov.uk.

We published a progress update last month regarding the development of a single official house price index. On 30 July 2015, the United Kingdom Statistics Authority published a special assessment of the development to date, which assessed compliance with the Code of Practice for Official Statistics¹ in respect of those aspects essential to the planning and development of methods for the new index.

A further update regarding progress towards implementation of the new index will be published in due course.

For further information, please contact Hpi@ons.gov.uk.

Notes for Development of a single, official house price index - update 1. http://www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html

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.gov.uk