New figures from the Office For National Statistics (ONS) indicate that average UK house price growth increased in the year to August 2016, defying expectations. Richard Carr comments.
In June 2016, the UK voted to abandon EU membership (Brexit). Many experts believed that Brexit would curtail the British residential real estate sector. ONS figures for July 2016 seemed to validate this concern. According to the agency average UK house prices expanded by 9.3% in the year to June 2016, falling to a growth rate of 8.3% in the 12 months to July 2016, but the market now seems to be picking up.
ONS has now released its August 2016 House Price Index. They found that average British residential property values expanded by 8.4% in the year to August. On average, a home in the UK now costs £219,000, rising by £19,000 in the year since August 2015. ONS house price data is regarded as more comprehensive than other surveys e.g. from Halifax and Nationwide banks, but they are released later.
House price growth was driven by East England, South East England and London where in August, values rose by 13.3%, 12.2% and 12.1% respectively. In regional terms, average house prices came in at £236,000 for England, £145,000 for Wales, £145,000 for Scotland and £123,000 for Northern Ireland, during August 2016. The price gaps between UK regions is expanding rapidly, according to the ONS.
The BBC cites the breach between the most and least expensive local UK areas to illustrate this point. The costliest area in the UK to buy a residential property is Kensington and Chelsea, a borough in London, with a price tag of £1.3m on average. The cheapest area in the UK to buy a house is Burnley and Blaenau Gwent in the North-West of England, where the average residential property value is £77,000.
UK housing market activity continued picking up in September 2016. The Royal Institution of Chartered Surveyors (Rics) has said that demand among residential property buyers increased for the first time in seven months during September, with an 8% rise. This contrasts sharply with June 2016, when there was a 34% drop in buyer enquiries, indicating that the market is experiencing post-Brexit growth.
It is clear that that UK housing market faced significant headwinds in spring and summer 2016, due to Brexit uncertainty. With the EU membership question now resolved and UK Prime Minister Theresa May recently announcing that the UK will being the two-year process of withdrawing from the EU, it appears as though the sector is now stabilising. Buyers are returning, causing house price growth to increase.