UK House Price Index: December 2015

Monthly house price inflation in the UK, calculated using data from HM Land Registry, Registers of Scotland and Land and Property Services Northern Ireland.

Nid hwn yw'r datganiad diweddaraf. Gweld y datganiad diweddaraf

Cyswllt:
Email Rhys Lewis

Dyddiad y datganiad:
16 February 2016

Cyhoeddiad nesaf:
22 March 2016

1. Main points

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.

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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 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.

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4. House price index by country

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)

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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 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

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6. Average house prices in countries and regions

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.

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7. House price index by type of buyer

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.

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

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.

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

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

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10. Economic context - December 2015

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.

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.Datasets

The HPI monthly and quarterly datasets (3.84 Mb Excel sheet) 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 December 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 fourth quarter (October to December) of 2015.

The HPI annual dataset (1.18 Mb Excel sheet) 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 (79.5 Kb Excel sheet) datasets provide 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.

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.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.gov.uk

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.Background notes

  1. New this month

    New house price data for December 2015 are published this month. The monthly and quarterly datasets (3.84 Mb Excel sheet) has been updated to include data for December 2015 and the fourth quarter (October to December) of 2015.

    Revisions this month

    October and November 2015 have been revised to incorporate transactions from those lenders that provide data on a quarterly basis. 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

    No revisions are expected for the January 2016 HPI, apart from normal revisions to the latest 12 months that follow the monthly seasonal adjustment process.

  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 also 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 November 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) paper 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 (79.5 Kb Excel sheet).

    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 (January to Marc) 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 December 2015 data. Future publication dates for this statistical bulletin are available via the release calendar.

  7. General

    Details of the policy governing the release of new data are available from the Media Relations Office. Also available is a list of the names of those given pre-release access to the contents of this release.

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  8. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gov.uk

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.Introducing the new single Official House Price Index: User Event

This user event follows the October 2014 consultation on the development of a single Official House Price Index and subsequent published responses to provide final details on the methodology being used in the development of the new, single official house price index (HPI). During this event, a historic time series for the new single Official HPI will be presented, comparing these new estimates with existing estimates of average house prices and house price growth. Scheduled to be first published in their entirety in June 2016, these new statistics will replace the existing indices published separately by ONS and Land Registry.

The single Official House Price Index user event will be held in London

Date: Wednesday 30 March 2016

Venue: Harvey Goodwin Suite, Church House Westminster, Deans Yard, Westminster, SW1P 3NZ

(http://www.churchhouseconf.co.uk/location)

Time: 11.00 am to 1.00 pm

Details:

Exact timings and content for the event are to be agreed; however, the event will cover the following topics and allow time for general discussion regarding the introduction of the new Official House Price Index and a question and answer session:

  1. Overview of the new HPI development and methodological changes

  2. Impact of changes - comparisons against existing house price measures

  3. Next steps: User transition to the single Official House Price Index

The event is free of charge although spaces are limited and will be allocated on a first come first served basis. To reserve your place, please email: hpi@ons.gov.uk (or tel. +44 (0)1633 456400) with the following details for each attendee: Name, organisation (if applicable), contact details (email address and contact number).

Please note that all registrations need to be received by 5.00pm on Friday 18 March 2016 to reserve a place.

For further information regarding the event please contact:

Rhys.lewis@ons.gov.uk (tel. +44 (0)1633 456400)

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Manylion cyswllt ar gyfer y Bwletin ystadegol

Rhys Lewis
rhys.lewis@ons.gov.uk
Ffôn: +44 (0)1633 456400