UK House Price Index: December 2015

UK house prices increased by 6.7% in the year to December 2015, down from 7.7% in the year to November 2015.

House price annual inflation was 7.3% in England, 1.0% in Wales, -0.2% in Scotland and 1.5% in Northern Ireland.

Annual house price increases in England were driven by an annual increase in the East (9.7%), London (9.4%) and the South East (8.8%).

Excluding London and the South East, UK house prices increased by 4.6% in the 12 months to December 2015.

On a seasonally adjusted basis, average house prices decreased by 0.2% between November 2015 and December 2015.

In December 2015, prices paid by first-time buyers were 6.4% higher on average than in December 2014.

For owner-occupiers (existing owners), prices increased by 6.9% 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 6.7% over the year to December 2015, down from 7.7% in the year to November 2015 (Figure 1). The average UK mix-adjusted house price in December 2015 was £288,000.

In December 2015, the UK mix-adjusted house price index decreased by 0.4% to 220.8 from record levels witnessed in November 2015 (221.6) (Figure 2). Despite the monthly decrease, the UK index is still 19.0% higher than the pre-economic downturn peak of 185.5 in January 2008.

On a seasonally adjusted basis, average house prices decreased by 0.2% between November and December 2015, compared with an increase of 0.8% in average prices during the same period a year earlier.

During the year to December 2015, average house prices increased by 7.3% in England (down from 8.3% in the year to November 2015), 1.0% in Wales (down from 1.4%) and 1.5% in Northern Ireland (up from 0.9%). There was a 0.2% decrease in average house prices in Scotland (down from a 1.2% increase in the year to November 2015).

The main movements for each country are:

• the index for England in December 2015 (219.6) is 0.3% below the record level of 220.3 in November 2015 (Figure 4) and is 21.5% higher than the pre-economic downturn peak in January 2008 (180.8)

• the index for Wales reached a record level in December 2015 (225.0) – this is 0.2% above the previous record level witnessed in January 2015 (224.6) and is 1.3% higher than the pre-economic downturn peak of January 2008 (222.1)

• the index for Scotland in December 2015 (226.7) is 6.8% below the record level witnessed in March 2015 (243.2) – Scotland prices are now 1.7% below the pre-economic downturn peak of June 2008 (230.6)

• the index for Northern Ireland in December 2015 (155.9) is 44.6% below the peak of August 2007 (281.5)

The pace of annual house price growth was again varied across the 9 English regions in December 2015 (Figure 5). The largest annual increase was in the East at 9.7% (down from 10.0% in the year to November 2015) followed by London (9.4% increase in the year to December 2015, down from 10.1% in the year to November 2015). The North East continues to have the lowest annual growth of the 9 regions, with prices increasing 0.9% in the year to December 2015 (up from 0.3% in the year to November 2015).

Excluding London and the South East, UK house prices increased by 4.6% over the year to December 2015, down from 5.8% in the year to November 2015.

This month, average house prices in only 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 4.3% below the peak of January 2008).

The main regional price index movements for December 2015 are:

the price index for the South East reached a record level of 205.9 in December 2015 - this is up 0.1% from the previous record in November 2015 (205.6) and 23.7% higher than the pre-economic downturn peak in January 2008 (166.5)

the price index for the East reached a record level of 208.6 in December 2015 - this is up 0.6% from the previous record in November 2015 (207.4) and 23.9% higher than the pre-economic downturn peak of January 2008 (168.4)

the 7 remaining regions fell back from the record levels witnessed in previous months, the most notable being in the West Midlands, where the index level fell by 1.7% to 196.5 in December 2015 (down from a record level of 199.8 in November 2015) – the North East and Yorkshire and the Humber regions both fell by 0.9% to 214.6 (from 216.5) and 215.0 (from 217.0) respectively

Average mix-adjusted house prices in December 2015 stood at £301,000 in England, £175,000 in Wales, £193,000 in Scotland and £148,000 in Northern Ireland (Figure 7).

In December 2015, London continued to be the English region with the highest average house price at £536,000 and the North East had the lowest average house price at £155,000. London, the South East and the East all had prices higher than the UK average price of £288,000.

Excluding London and the South East, the average UK mix-adjusted house price was £218,000.

The average price for properties bought by first-time buyers increased by 6.4% over the year to December 2015, down from an increase of 7.5% in the year to November 2015 (Figure 8). In December 2015, the average price paid for a house by a first-time buyer was £219,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 6.9% in the year to December 2015, down from an increase of 7.8% in the year to November 2015. In December 2015, the average price paid for a house by a former owner-occupier was £335,000.

During the year to December 2015, prices paid for new dwellings increased by 7.0% on average, compared with an increase of 13.6% in the year to November 2015 (Figure 9). The average UK house price for new dwellings in December 2015 was £284,000.

During the year to December 2015, prices paid for pre-owned dwellings increased by 6.7% on average, compared with an increase of 7.3% in the year to November 2015. The average UK house price for pre-owned dwellings in December 2015 was £288,000.

This is an update to the progress report published in December 2015, which reported that there had been delays in getting access to Scottish property attribute data (via the Scottish Energy Performance Certificates) due to the legislative process involved. This data has now been received.

Following the receipt of this data, 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. Details on the transition plan to move to the next phase of development can also be found in the February 2016 article.

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

House price growth remained strong in the year to December 2015. House prices grew at a rate of 6.7% in the 12 months to December 2015, although this was lower than the 7.7% inflation rate in November 2015 and the average rate in the 5 years before the economic downturn (January 2003 to December 2007), which was 10.2%. House prices have been growing since early 2012 and in December 2015 were 23.3% higher than average levels seen in 2007 before the economic downturn. On a monthly (seasonally adjusted) basis, prices fell by 0.2% between November and December 2015, ending 7 months of consecutive increases. Growth in house prices was partly driven by the East (up 9.7% in the year to December 2015), London (9.4%) and the South East (8.8%).

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 Quarter 4 (Oct to Dec) 2015 reporting that although secondary market supply had picked up in some areas, the lack of availability of properties available in the market is constraining growth in the market and supporting price increases. In the new-build market, our Output in the Construction Industry release indicates total housing output fell 1.8% in the year to November 2015. These dynamics are reflected in the latest data from the Royal Institution of Chartered Surveyors, which suggests that supply, as indicated by instructions to sell, was broadly unchanged in December 2015, following 10 months of consecutive falls.

While supply remains tight, demand for house purchases remains strong, as highlighted in the Bank of England’s November Inflation Report. The volume of mortgage approvals – a leading indicator of housing purchases – grew by 21.3% in the year to December 2015. The number of UK home sales also continued to grow in the 3 months to December 2015 (October to December): rising by 3.4% relative to the preceding three months (July-September), higher than the equivalent rate in November 2015. Data from the Royal Institution of Chartered Surveyors (RICS) also suggests buyer demand increased in December 2015.

Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing by 0.5% in the fourth quarter (October to December) of 2015, a slightly faster rate than in Quarter 3 (July to September). Labour market conditions have continued to strengthen, as unemployment fell to 5.1% for the 3 months to November 2015; the rate has not been lower since the 3 months to October 2005. Annual pay growth has also strengthened in 2015 compared with 2014, although the rate of this growth has eased in recent months. These improvements, along with a fall 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.