New figures from the Office for National Statistics (ONS) show that average UK house prices recorded “strong growth” in the year to April 2016. Interestingly, the ONS recently implemented a new method for calculating average British residential property values. This means that that value of a typical UK home technically decreased significantly from March to April 2016.
Robust housing market
The UK housing market has been recording increasingly impressive growth for the last two and a half years. The ONS’ March 2016 House Price Index, for instance, illustrates that average UK house prices expanded by 9% in the year to March 2016, rising from a growth rate of 7.6% in the 12 months to February 2016. In March, the ONS put the typical British residential property value at £292,000.
Implementing a new method
These figures were however determined using a formula which the ONS has now chosen to abandon. The statistics organisation implemented a new formula for its April 2016 House Price Index, which “is not as sensitive to extreme valued property.” Under this new system, expensive properties in high-value markets such as London are less likely to artificially inflate average housing values.
With this new formula, Sky News reports, the ONS stated that average UK house prices expanded by 8.2% in the year to April 2016. However, the typical value for a UK residential property now sits at £209,054, which is £83,000 below the value recorded under the previous formula in March. The statistical body has described its growth figure as “an experimental official statistic” for now.
Strong regional variations
Average property prices may have been revised downward, but many UK regions experienced robust house price growth over the past year. London is the perfect example. In March 2016, the ONS put the average London residential property value at £552,000. This has now been revised down past the half million mark to £470,000. But average London house prices expanded by 14.5% in the year to April, cementing its status as the fastest growing residential property region in the country.
The ONS found that Burnley in Lancashire is now the cheapest place in the UK to buy a house. An average house in Burnley costs just £73,000, as of April 2016. Many areas across the UK did see strong growth in average housing figures in the latest index but not Merthyr Tydfil in Wales. In this area of the country, average residential property values declined by 11.1% within this time frame.
Future market trajectory
Speaking to Sky News, Howard Archer of economics organisation IHS Global Insight, forecasted the future trajectory of the UK housing market. He argued that the upcoming EU referendum, coupled with the introduction of stamp duty for buy-to-let investors, which Richard Carr recently commented on, has limited residential market activity. But, Archer added, the UK’s ongoing residential real estate shortage is “likely provide support to house prices” going forward.