Monthly UK House Prices Fall, But Which Areas Benefited Most During the Pandemic?
- By Sam van de Schootbrugge
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- 2 min read
Nationwide announced today that average house prices in January fell 0.3% on the month. The news comes two weeks after Rightmove released its January figures showing a 0.9% MoM fall in asking prices (Charts 1 and 2). Nationwide is the timeliest source of actual house prices, with their data based on Nationwide mortgage applications. Halifax is due to release its data at the end of this week.
According to the latest data, average UK house prices now stand at £229,750, down 0.3% MoM but up 6.4% YoY. Nationwide’s house price estimates have historically followed the more accurate, but less timely, Land Registry data closely (Chart 3). Correlation between YoY changes in both series since 2010 is 0.87.
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Summary
- Nationwide figures show a 0.3% MoM fall in house prices, the first in six months.
- Annual growth rates have dropped but remain high relative to historical averages.
- A significant rise in residential property completions drove strong price growth in 2020, the latest HMRC data suggests.
- The North East experienced the largest increase in demand, with Bassetlaw top for growth in real estate transactions.
Nationwide Data
Nationwide announced today that average house prices in January fell 0.3% on the month. The news comes two weeks after Rightmove released its January figures showing a 0.9% MoM fall in asking prices (Charts 1 and 2). Nationwide is the timeliest source of actual house prices, with their data based on Nationwide mortgage applications. Halifax is due to release its data at the end of this week.
According to the latest data, average UK house prices now stand at £229,750, down 0.3% MoM but up 6.4% YoY. Nationwide’s house price estimates have historically followed the more accurate, but less timely, Land Registry data closely (Chart 3). Correlation between YoY changes in both series since 2010 is 0.87.
The MoM decline in house prices is the first since June. Prices had been growing at an average of 0.9% MoM in Q4 2020, but there are signs momentum is falling (Chart 4). Meanwhile, YoY growth remains relatively high – prices are up 6.4% on last year, almost double the YoY average 2010-2020.
Prices During the Pandemic
Residential property was a surprise outperformer in 2020. Comparing annualised MoM changes and YoY changes between 2010 and 2020 with pandemic levels, house prices have seen remarkable growth (Chart 5). Annualised MoM figures are over twice as high as the past decade, driven by uncharacteristically high demand (Chart 6).
HMRC data on completions shows a significant spike towards the end of last year. There were 350,000 completions in Q4 2020, surpassed only by Q1 2016 (1 April saw the introduction of an additional 3% stamp duty land tax charge for purchases of second homes). The latest data from the UK Land Registry shows where the highest growth in completions has been (Tables 1 and 2).
In line with regional data on asking prices, demand for real estate has grown considerably in the North East and South West during the pandemic. In fact, all regions have experienced higher-than-average growth in transaction volumes during the pandemic. Drilling down, Bassetlaw has seen the largest rise, while the Inner London area has recorded the lowest growth in transactions.
Sam van de Schootbrugge is a macro research economist taking a one year industrial break from his Ph.D. in Economics. He has 2 years of experience working in government and has an MPhil degree in Economic Research from the University of Cambridge. His research expertise are in international finance, macroeconomics and fiscal policy.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)