UK House Price Index: January 2016

UK house prices increased by 7.9% in the year to January 2016, up from 6.7% in the year to December 2015.

House price annual inflation was 8.6% in England, -0.3% in Wales, 0.1% in Scotland and 0.8% in Northern Ireland.

Annual house price increases in England were driven by an annual increase in the South East (11.7%), London (10.8%) and the East (9.8%).

Excluding London and the South East, UK house prices increased by 5.1% in the 12 months to January 2016.

On a seasonally adjusted basis, average house prices increased by 0.9% between December 2015 and January 2016.

In January 2016, prices paid by first-time buyers were 7.7% higher on average than in January 2015.

For owner-occupiers (existing owners), prices increased by 8.0% for the same period.

UK average mix-adjusted house price in January 2016 was £292,000.

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 7.9% over the year to January 2016, up from 6.7% in the year to December 2015 (Figure 1). The average UK mix-adjusted house price in January 2016 was £292,000.

In January 2016, the UK mix-adjusted house price index increased by 1.4% on December 2015, to a record level of 223.9 (Figure 2). The UK index is 20.7% higher than the pre-economic downturn peak of 185.5 in January 2008.

On a seasonally adjusted basis, average house prices increased by 0.9% between December 2015 and January 2016, compared with a decrease of 0.3% in average prices during the same period a year earlier.

During the year to January 2016, average house prices increased by 8.6% in England (up from 7.3% in the year to December 2015), 0.1% in Scotland (up from -0.2%) and 0.8% in Northern Ireland (down from 1.5%). There was a 0.3% decrease in average house prices in Wales (down from a 1.0% increase in the year to December 2015).

The main movements for each country are:

• the index for England in January 2016 (222.8) is 1.4% higher than in December 2015 (219.6) (Figure 4) and is 23.2% higher than the pre-economic downturn peak in January 2008 (180.8)

• the index for Wales in January 2016 was 224.0 – this is 0.4% below the previous record level witnessed in December 2015 (225.0) and is 0.9% higher than the pre-economic downturn peak of January 2008 (222.1)

• the index for Scotland in January 2016 (229.5) is 5.6% below the record level witnessed in March 2015 (243.2) – Scotland prices are now 0.5% below the pre-economic downturn peak of June 2008 (230.6)

• the index for Northern Ireland in January 2016 (160.7) is 42.9% below the peak of August 2007 (281.5)

The pace of annual house price growth was again varied across the 9 English regions in January 2016 (Figure 5). The largest annual increase was in the South East at 11.7% (up from 8.8% in the year to December 2015) followed by London (10.8% increase in the year to January 2016, up from 9.4% in the year to December 2015). The North East continues to have the lowest annual growth of the 9 regions, with prices increasing 0.9% in the year to January 2016 (unchanged from 0.9% in the year to December 2015).

Excluding London and the South East, UK house prices increased by 5.1% over the year to January 2016, up from 4.6% in the year to December 2015.

This month, average house prices in only 3 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 3.7% below the peak of January 2008).

The main regional price index movements for January 2016 are:

• the price index for London reached a record level of 267.6 in January 2016 – this is up 2.4% from the previous record in November 2015 (261.3) and 53.4% higher than the pre-economic downturn peak in January 2008 (174.5)

• the price index for the South East reached a record level of 211.1 in January 2016 – this is up 2.5% from the previous record in December 2015 (205.9) and 26.8% higher than the pre-economic downturn peak of January 2008 (166.5)

• the price index for the East reached a record level of 209.1 in January 2016 – this is up 0.2% from the previous record in December 2015 (208.6) and 24.2% higher than the pre-economic downturn peak of January 2008 (168.4)

• the 6 remaining regions fell back from the record levels witnessed in previous months, the most notable being in Yorkshire and The Humber, where the index level fell by 0.8% to 213.2 in January 2016 (down from 215.0 in December 2015) and the West midlands, which fell by 0.5% to 195.6 (down from 196.5 in December 2015)

Average mix-adjusted house prices in January 2016 stood at a record high of £306,000 in England, £174,000 in Wales, £195,000 in Scotland and £153,000 in Northern Ireland (Figure 7).

In January 2016, London continued to be the English region with the highest average house price at a record high of £551,000 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 £292,000.

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 7.7% over the year to January 2016, up from an increase of 6.4% in the year to December 2015 (Figure 8). In January 2016, the average price paid for a house by a first-time buyer was £222,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 8.0% in the year to January 2016, up from an increase of 6.9% in the year to December 2015. In January 2016, the average price paid for a house by a former owner-occupier was £340,000.

During the year to January 2016, prices paid for new dwellings increased by 8.3% on average, compared with an increase of 7.0% in the year to December 2015 (Figure 9). The average UK house price for new dwellings in January 2016 was £282,000.

During the year to January 2016, prices paid for pre-owned dwellings increased by 7.9% on average, compared with an increase of 6.7% in the year to December 2015. The average UK house price for pre-owned dwellings in January 2016 was £292,000.

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. 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

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, an 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

Time: 11.00am to 1.00pm

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 with the following details for each attendee: Name, organisation (if applicable), contact details (email address and contact number).

For further information regarding the event please contact:
Rhys.lewis@ons.gov.uk (tel. +44 (0)1633 456400)

House price growth remained robust in the year to January 2016. House prices grew at a rate of 7.9% in the 12 months to January 2016, stronger than the 6.7% rate in the year to December 2015 and the highest rate since March 2015. House prices have now been growing since early 2012 and in January 2016 were 25.1% higher than average levels seen in 2007 before the economic downturn. On a monthly (seasonally adjusted) basis, prices increased by 0.9% between December 2015 and January 2016. The increase in the 12-month rate in January was partly driven by the South East, where prices increased 11.7%, up from 8.8% in December 2015, and London, where prices increased 10.8%, up from 9.4% in December. Despite these strong regional growth rates, UK price growth of 7.9% in the year to January 2016 is 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 January 2016 reporting that housing activity remains subdued relative to pre-crisis levels, constrained by a shortage of properties for sale. Despite the rise in house prices, in the new-build market, the ONS Output in the Construction Industry release indicates that total housing output increased 0.6% in the previous 3 months (Nov to Jan) compared with the same period a year earlier. By contrast, the latest data from the Royal Institution of Chartered Surveyors suggests that supply has increased modestly in the last 2 months 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 26.3% in the year to January 2015. The number of UK home sales also continued to grow in the 3 months to January (Nov to Jan): rising by 1.5% relative to the preceding 3 months (Aug to Oct). Data from the Royal Institution of Chartered Surveyors (RICS) also suggests buyer demand increased in January 2016 and is currently outstripping supply.

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 output increasing by 0.5% in the fourth quarter (Oct to Dec) of 2015, a slightly faster rate than in Quarter 3 (July to Sep) 2015. Labour market conditions have continued to strengthen, as unemployment fell to 5.1% for the 3 months to December 2015; the rate has not been lower since the 3 months to October 2005. Annual pay growth 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.