The e-surv house price index was published on the 14th September. It shows that the average house price was £226,243, which is a 0.1% increase from the previous month. This represents a 2.6% increase annually. The e-Surv report includes cash sales so in a more accurate index than those published by Nationwide and Halifax.
It tells a similar story to the Land Registry report for July: there is a definite North-South divide, and prices in London and the South-east are skewing the results quite drastically. In Kensington and Chelsea, house prices have risen by a whopping 31%, whilst in Blackpool prices dropped by 3.1%.
So, while prices in London keep rising, a lot of areas in the North of England are seeing prices drop, in some places by over 5%.
David Newnes, director of LSL Property Services, comments:
“The housing market demonstrated its resilience in August, as both house prices and sales activity rose, highlighting the underlying demand from buyers. In place of the usual seasonal slowdown, transactions bounced back by 2.5% in August. However, rather than signalling a radical shift in the housing market, the improvement reflects a mini-resurgence following more sluggish buyer activity earlier in the summer, affected by a combination of the Jubilee bank holiday and historically heavy rainfall. In reality, obtaining a big enough mortgage remains a hurdle for thousands of first-time buyers, despite the government’s NewBuy scheme. While a lack of stock continues to support house prices, it is cash buyers and the equity rich that are providing the impetus for short-term improvements in the market.
“However, it’s not a homogenous picture across England and Wales. With wealthier investors playing a pivotal role in the national housing market, there is an increasing divide between the North and South. London, the South East and the South West - where there are greater concentrations of wealthier buyers - are the key driving forces at present, and are seeing the fastest rate of annual price growth. Even within cities, local markets are running at completely different paces. In London, for instance, Kensington & Chelsea is seeing five times the annual price growth of a less affluent borough such as Lewisham.
“In light of the difficult economic backdrop, it’s encouraging to see the government place the housing sector in the limelight, extending its shared equity scheme First Buy and supporting new house building. However, to reignite the recovery in the national housing market, these measures need to be supported by a concerted effort from lenders to help unlock the lower tiers, supplying appropriate credit to those first-time buyers who need it most.”
The Bank of England target for house price growth is 2%, if house prices (however skewed by London prices) continue to show the kind of increases we have seen over recent months; annual house price growth will be more like 2.5% or even 3%.
Due to the regional differences between North and South, and the huge variance caused by prices in Kensington and Chelsea when compared to northern cities, bargains can still be found for the buy to let landlord (or wannabe BTL landlord). The old rules stay the same: look for something that meets your target tenants’ needs – e.g. close to the university if you’re looking for student tenants; or close to good schools if it’s families you want to attract.