UK House Price Index: February 2016

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.

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 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.

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)

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)

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.

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.

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.

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.gov.uk

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.

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.

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