UK House Price Index: October 2015

• UK house prices increased by 7.0% in the year to October 2015, up from 6.1% in the year to September 2015.

• House price annual inflation was 7.4% in England, 1.0% in Wales, 0.9% in Scotland and 10.3% in Northern Ireland.

• Annual house price increases in England were driven by an annual increase in the East (10.4%) and the South East (9.5%).
• Excluding London and the South East, UK house prices increased by 5.6% in the 12 months to October 2015.
• On a seasonally adjusted basis, average house prices increased by 0.8% between September and October 2015.
• In October 2015, prices paid by first-time buyers were 5.9% higher on average than in October 2014.
• For owner-occupiers (existing owners), prices increased by 7.4% for the same period.
• Average mix-adjusted house prices in October 2015 reached £300,000 in England and stood at £174,000 in Wales, £196,000 in Scotland and £158,000 in Northern Ireland.

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.

In October 2015, the UK mix-adjusted house price index increased by 0.1% from the previous record level witnessed in September 2015 to reach a new record of 220.1 (Figure 2). The UK index is 18.7% higher than the pre-economic downturn peak of 185.5 in January 2008.

On a seasonally adjusted basis, average house prices increased by 0.8% between September and October 2015, compared with a decrease of 0.1% in average prices during the same period a year earlier.

During the year to October 2015, average house prices increased 7.4% in England (up from 6.4% in the year to September 2015), 1.0% in Wales (down from 1.1%), 0.9% in Scotland (down from 1.1%) and 10.3% in Northern Ireland (up from 10.2%).

The main movements for each country are:

• the index for England reached a new record of 218.7 in October 2015 (Figure 4). This is 0.3% above the previous record level witnessed in September 2015 (218.1) and 21.0% higher than the pre-economic downturn peak in January 2008 of 180.8
• the index for Wales in October 2015 (223.9) is 0.3% below the record level of 224.6 in January 2015. House prices in Wales are 0.8% higher than the pre-economic downturn peak of January 2008 (222.1)
• the index for Scotland in October 2015 (230.2) is 5.3% 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 Northern Ireland in October 2015 (165.8) is 41.1% below the peak of August 2007 (281.5)

The pace of annual house price growth was again varied across the 9 English regions in October 2015 (Figure 5). The largest annual increase was in the East at 10.4% (up from 8.4% in the year to September 2015) followed by the South East (9.5% increase in the year to October 2015, up from 7.4% in the year to September). The North East had the lowest annual growth of the 9 regions, with prices increasing 2.9% in the year to October 2015 (up from 1.8% in the year to September).

London prices increased by 7.7% over the year to October 2015 (up from 7.2% in the year to September 2015).

Excluding London and the South East, UK house prices increased by 5.6% over the year to October 2015, up from 5.0% in the year to September 2015.

This month, average house prices in 4 of the 9 English regions are at record levels (Figure 6). House prices in the West Midlands and the South West fell back slightly from the record levels witnessed in September 2015. The North East is the only English region yet to surpass its pre-economic downturn peak (prices in the North East remain 2.5% below the peak of January 2008).

The main regional price index movements for October 2015 are:

• the price index for the South East reached a record level of 205.5 in October 2015. This is up 1.4% from the previous record in August 2015 (202.6) and 23.4% higher than the pre-economic downturn peak in January 2008 (166.5)

• the price index for London reached a joint record level of 257.9 in October 2015 (also this level in September 2015). This is 47.8% higher than the pre-economic downturn peak of January 2008 (174.5)

• the price index for the East Midlands reached a record level of 206.1 in October 2015. This is up 0.9% from the previous record in August 2015 (204.3) and 6.5% higher than the pre-economic downturn peak in January 2008 (193.5)

• the price index for the East reached a record level of 205.5 in October 2015. This is up 0.3% from the previous record of 204.9 in September 2015 and 22.0% higher than the pre-economic downturn peak in January 2008 (168.4)

Average mix-adjusted house prices in October 2015 reached £300,000 in England and stood at £174,000 in Wales, £196,000 in Scotland and £158,000 in Northern Ireland (Figure 7).

In October 2015, London continued to be the English region with the highest average house price at £531,000 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 £287,000.

Excluding London and the South East, the average UK mix-adjusted house price was £217,000.

The average price for properties bought by first-time buyers increased by 5.9% over the year to October 2015, up from an increase of 4.3% in the year to September 2015 (Figure 8). In October 2015, the average price paid for a house by a first-time buyer was £218,000.

The average price for properties bought by former owner-occupiers (existing owners) increased by 7.4% in the year to October 2015, up from an increase of 6.9% in the year to September 2015. In October 2015, the average price paid for a house by a former owner-occupier was £334,000.

During the year to October 2015, prices paid for new dwellings increased by 14.8% on average, compared with an increase of 6.3% in the year to September 2015 (Figure 9). The average UK house price for new dwellings in October 2015 was £286,000.

During the year to October 2015, prices paid for pre-owned dwellings increased by 6.4% on average, compared with an increase of 6.1% in the year to September 2015. The average UK house price for pre-owned dwellings in October 2015 was £287,000.

This is an update to the progress report published in October 2015, which reported that the methodology for the new house price index (HPI) would be finalised and described in an article by late November 2015.

There has been a further delay in getting access to Scottish property attribute data (via the Scottish Energy Performance Certificates) due to the legislative process involved. This data is required to complete the input set of data needed for the production of the new HPI and to finalise the new methodology. The necessary regulations have been laid (on 12 November 2015) but do not come into force until 19 December 2015, which means data access is restricted until after this date.

This means the methodological article due to be published by end-November 2015 has been postponed until early 2016. This delay does not impact on the proposal to publish the new HPI by mid-2016. Further details on the transition plan to move to the new HPI and the next phase of development will be published in the early 2016 article.

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

UK house prices continued to grow strongly in October 2015. House prices increased 7.0% in the 12 months to October 2015: the highest annual rate of increase since March 2015 and the third consecutive increase in the annual growth rate since the 22-month low of 5.2% in July 2015. On a monthly basis, prices grew by 0.8%, unchanged on the September 2015 rate. The increase in the annual rate of price growth was partly driven by the East of England, where prices grew by 10.4%, 2.0 percentage points faster than in the year to September 2015.

Upwards pressure on house prices may be a result of a shortage of supply and a strengthening of demand in the housing market, 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 Conditions for October reporting a shortage of properties available for sale. This suggests the lack of homes available for sale increases competition and supports prices. In the new-build market, the ONS Output in the Construction Industry release indicated that total housing output fell 1.7% in the year to October, although this was a smaller contraction than the three previous months. In the secondary market, the Bank of England’s Agents’ Summary of Business Conditions for Q3 reported that weak activity could be self-perpetuating, as potential vendors remain reluctant to put their homes on the market without suitable properties available for purchase. These dynamics are reflected in the latest data from the Royal Institution of Chartered Surveyors, which noted the supply of new sales instructions coming to the market decreased for the ninth month in succession.

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 21.9% in the year to October 2015. Mirroring this increase in demand, UK home sales have continued to pick-up despite the shortage of supply, and in the three months to October (Aug-Oct) were 3.1% higher than in the preceding three months (May-Jul).

Broader economic indicators suggest that the economy has continued to grow relatively strongly, over recent periods, with output increasing by 0.5% in the third quarter of 2015, although this represented an easing of growth compared to the second quarter. Labour market conditions) have continued to strengthen, as unemployment fell to 5.3% for July to September 2015, a figure that has not been lower since March to May 2008. Annual pay growth has also strengthened in 2015 compared to 2014. These improvements, along with a resurgence in job-to-job moves 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.

House price statistics for small areas (HPSSAs) are detailed in an article accompanying this release. Annual data are published on a rolling quarterly basis from the year ending Quarter 4 (Oct to Dec) 1995 to the year ending Quarter 2 (Apr to June) 2015.

HPSSAs report statistics on house prices for all residential property sales along with a breakdown of these sales by dwelling type (detached, semi-detached, terraced and flats and maisonettes) and newly built or existing dwellings. For the reported house price statistics, associated counts of residential property sales are also published. The statistics are calculated using open data from the Land Registry and are published for a range of subnational geographies including middle layer super output areas, local authorities and parliamentary constituencies in England and Wales.

HPSSAs are different to statistics included in the HPI and the 2 are not directly comparable. The HPI provides an economic measure of inflation over time, representative of the changing mean value of the housing stock, taking into account the mix of different houses. This provides an appropriate measure for inflation in property value as it is mix-adjusted to account for differences in the characteristics of houses in an area. HPSSAs focus on the median price paid for residential properties that were actually sold in a particular period. They are not mix-adjusted, which means variations in the composition of dwelling types sold can influence the house prices reported here.

Full details regarding the methodology used to produce the price statistics is published in the accompanying Quality and Methodology Information document (337.1 Kb Pdf) for further information, please contact hpi@ons.gov.uk.

The HPI monthly and quarterly reference table (3.72 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 October 2015. The seasonally adjusted figures in Table 7 have been revised this month as scheduled.

The HPI annual reference table (1.19 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) reference table provides 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.

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

1. New this month

   New house price data for October 2015 are published this month. The monthly reference (3.72 Mb Excel sheet) table has been updated to include data for October 2015.

   Revisions this month

   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 November 2015 HPI, apart from the 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 October 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) (131.8 Kb Pdf) 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 (246.4 Kb Pdf) published on the [HPI user guidance webpage](http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/hpi/index.html "House Price Index (HPI) user guidance and methodology).

   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 reference table (79.5 Kb Excel sheet "RFT annual weights") .

   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 (974.4 Kb Pdf) .

   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 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 October 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.

   Follow us on Twitter or join us at Facebook.

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