UK House Price Index: July 2015

• UK house prices increased by 5.2% in the year to July 2015, down from 5.7% in the year to June 2015

• House price annual inflation was 5.6% in England, 0.3% in Wales, 7.4% in Northern Ireland and -1.3% in Scotland

• Annual house price increases in England were driven by an annual increase in the East (8.3%) and the South East (6.7%)

• Excluding London and the South East, UK house prices increased by 4.4% in the 12 months to July 2015

• On a seasonally adjusted basis, average house prices increased by 0.8% between June and July 2015

• In July 2015, prices paid by first-time buyers were 4.4% higher on average than in July 2014

• For owner-occupiers (existing owners), prices increased by 5.5% 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 5.2% over the year to July 2015, down from an increase of 5.7% in the year to June 2015 (Figure 1). The average UK mix-adjusted house price in July 2015 was £282,000.

In July 2015, the UK mix-adjusted house price index increased by 2.0% from the record level witnessed in June 2015 to reach 216.9 (Figure 2). The UK index is 16.9% higher than the pre-economic downturn peak of 185.5 in January 2008.

On a seasonally adjusted basis, average house prices increased by 0.8% between June and July 2015, compared to an increase of 1.2% in average prices during the same period a year earlier.

During the year to July 2015, average house prices increased by 5.6% in England (down from 6.1% in the year to June 2015), 0.3% in Wales (down from 0.8%) and 7.4% in Northern Ireland (down from 9.0%). House prices fell by 1.3% in Scotland over the last 12 months (compared with annual fall of 0.6% last month).

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

• The index for England reached 215.3 in July 2015. This is 2.0% above the previous record level witnessed in June 2015 (211.0) and 19.1% higher than the pre-economic downturn peak in January 2008 of 180.8

• The index for Scotland in July 2015 (230.1) is 5.4% below the record level witnessed in March 2015 (243.2). Scotland prices are now 0.2% below the pre-economic downturn peak of June 2008 (230.6)

• The index for Wales in July 2015 (222.0) is 1.2% below the record level of 224.6 in January 2015. House prices in Wales are slightly lower than the pre-economic downturn peak of January 2008 (222.1)

• The index for Northern Ireland in July 2015 (162.4) is 42.3% below the peak of August 2007 (281.5)

The pace of annual house price growth slowed across the majority of the 9 English regions in July 2015 (Figure 5). The largest annual increase was again in the East at 8.3% (down from 9.2% in the year to June 2015), followed by the South East (6.7% increase in the year to July 2015, down from 7.7%). The North East was the only English region to see a fall in prices; here prices fell by 0.7% over the year. This is the first annual fall in North East house prices since July 2013.

London prices increased by 5.5% over the year to July 2015 (up from 5.3% in the year to June 2015).

Excluding London and the South East, UK house prices increased by 4.4% over the year to July 2015, down from 5.2% in the year to June 2015.

This month, average house prices in 7 of the 9 English regions are at record levels, with prices in the North West surpassing the pre-economic downturn peak of January 2008 for the first time (Figure 6). The only English regions not now at record levels are the North East and Yorkshire and The Humber.

The main regional price index movements for July 2015 are:

• The price index for the North West reached a record level of 213.6 in July 2015. This is 1.5% higher than the previous record level of 210.4 in January 2008

• The price index for the East Midlands reached a record level of 205.0 in July 2015. This is up 1.1% from the previous record level of 202.8 in June 2015. The price index for the East Midlands is 5.9% higher than the pre-economic downturn peak in January 2008 (193.5)

• The price index for the West Midlands reached a record level of 197.0 in July 2015. This is up 2.8% from the previous record in June 2015 (191.6) and 6.3% higher than the pre-economic downturn peak in October 2007 (185.4)

• The price index for the East reached a record level of 200.1 in July 2015. This is up 2.2% from the previous record in June 2015 (195.8) and 18.8% higher than the pre-economic downturn peak in January 2008 (168.4)

• The price index for London is 2.4% above the previous record level of 249.1 in June 2015, reaching 255.2 in July 2015. The London index is 46.2% higher than the pre-economic downturn peak in January 2008 (174.5)

• The price index for the South East reached a record level of 199.8 in July 2015. This is up 2.1% from the previous record in June 2015 (195.7) and 20.0% higher than the pre-economic downturn peak in January 2008 (166.5)

• The price index for the South West reached a record level of 192.2 in July 2015. This is up 0.7% from the previous record in June 2015 (190.9) and 6.4% higher than the pre-economic downturn peak in October 2007 (180.7)

Average mix-adjusted house prices in July 2015 stood at £295,000 in England, £173,000 in Wales, £154,000 in Northern Ireland and £196,000 in Scotland (Figure 7).

In July 2015, London continued to be the English region with the highest average house price at £525,000 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 £282,000.

Excluding London and the South East, the average UK mix-adjusted house price was £215,000.

The average price for properties bought by first-time buyers increased by 4.4% over the year to July 2015, down from an increase of 5.1% in the year to June 2015 (Figure 8). In July 2015, the average price paid for a house by a first-time buyer was £215,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 5.5% in the year to July 2015, down from an increase of 6.0% in the year to June 2015. In July 2015, the average price paid for a house by a former owner-occupier was £329,000.

During the year to July 2015, prices paid for new dwellings increased by 5.8% on average, compared with an increase of 9.5% in the year to June 2015 (Figure 9). The average UK house price for new dwellings in July 2015 was £273,000.

During the year to July 2015, prices paid for pre-owned dwellings increased by 5.1% on average, compared with an increase of 5.4% in the year to June 2015. The average UK house price for pre-owned dwellings in July 2015 was £283,000.

The UK housing market continued to show signs of easing in July 2015, with annual house price growth slowing to 5.2%, the lowest rate of change since September 2013. On a monthly (seasonally adjusted) basis, prices grew by 0.8%, 0.2 percentage points above the June 2015 rate. The slowing in the annual rate of house price growth despite the monthly increase therefore reflects the relatively high base for comparison, with prices growing at a particularly strong rate in July 2014. The softening in the annual pace of house price growth continues a trend that has been in evidence since mid-2014: twelve months ago, the annual rate of house price growth reached 11.5%, more than double the headline rate this month.

Although weaker, the pace of house price growth remains strong by historical standards. With improving economic conditions sustaining a recovery in housing demand while supply remains tight, the mismatch between demand and supply continues to support house price growth.

A number of housing market indicators support this view. As highlighted in the Bank of England’s August Inflation Report, demand for house purchases continues to grow. Confirming this, the RICS Residential Market Survey for July reported a further rise in buyer demand, and the volume of mortgage approvals - a leading indicator of housing purchases - is now 12.8% above its level at the start of the year. Reflecting this growth in demand, UK home sales have continued to pick up and in the three months to July were 3.1% above the preceding three months.

While demand shows signs of strength, supply remains weak. The July 2015 ONS Output in the Construction Industry release indicates total housing output fell 2.7% in July and is now below its level in July 2014. The latest RICS data shows that new instructions to sell remained restricted and that the shortage of unsold stock worsened further during July, reaching a new record low. 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% and annual regular pay grew by 2.8% in the three months to June 2015. House price growth continues to outpace real earnings growth, but the gap is closing as the slowing housing market coincides with strengthening nominal pay growth and low inflation. These recent trends have improved households’ income expectations and their economic position more broadly, with possible implications for the evolution of house prices.