Monthly Change 1.2% Annual Change 21.5% Standardised Average Price (seasonally adjusted) £159,735
Key Points
- House prices increased in all regions in the second quarter. Scotland recorded the biggest rise (11.9%) - the highest quarterly rise we have seen north of the border. The next biggest gains were in the East Midlands (8.7%), North (7.8%) and North West (7.6%). The smallest price rises were in Greater London (1.8%), Northern Ireland (1.8%) and the South East (3.2%).
- The north/south divide narrowed further in the second quarter with the average price in the south falling from a peak of 2.19 times higher than in the north in 2002 Quarter 2 to 1.74 times higher in 2004 Quarter 2. This is the smallest gap for five years and has returned the north/south divide to close to the 1.69 average during the last 20 years.
- Over the past year, the biggest price rises have been in northern England and Wales - North (36%), Wales (36%), North West (34%) and Yorkshire and the Humber (28%). Despite these strong performances, there were signs of a slowdown in these areas with prices rising by less in the second quarter than in the preceding quarter.
- The average price in both West Midlands (£152,869) and East Anglia (£154,989) surpassed the £150,000 barrier for the first time during the second quarter, therefore joining Greater London, the South East and the South West above this mark.
- The rapid rise in house prices over the past few years in the north means that increasing numbers of first-time buyers now face similar difficulties to those in the south in getting onto the housing ladder. There are now signs that this is causing house price inflation in the north to slow. We expect this trend to continue during the second half of the year, contributing to slower UK house price inflation.
ABOUT THE HALIFAX HOUSE PRICE INDEX
The Halifax House Price Index is the UK's longest running monthly house price series with data covering the whole country going back to January 1983. The Index is typically based on around 15,000 house purchases per month, and covers the whole calendar month. From this data, a "standardised" house price is calculated and property price movements on a like-for-like basis (including seasonal adjustments) are analysed over time. Properties over £1 million are included and the index is seasonally adjusted with the seasonal factors updated monthly.
Commenting, Martin Ellis, Chief Economist, said:
"House prices increased by 1.2% in June. This was the smallest gain since last November and was below the average 2.1% rise in the previous six months. This suggests that the recent increases in the cost of borrowing are beginning to curb housing demand.
The biggest price rises in the last year have been in northern England and Wales. There were, however, signs of a slowdown in these parts of the country with prices rising by less in the second quarter than in the preceding quarter. We expect this trend to continue during the second half of the year, contributing to slower UK house price inflation."
House prices rise most rapidly in northern Britain ……….
House prices increased in all regions of the UK during the second quarter. Scotland recorded the biggest rise (11.9%), the highest quarterly rise we have seen north of the border. The next biggest gains were in the East Midlands (8.7%), North (7.8%) and North West (7.6%). The smallest price rises in the second quarter were in Greater London (1.8%), Northern Ireland (1.8%) and the South East (3.2%).
Over the past year, the biggest price rises have been in northern England and Wales - North (36%), Wales (36%), North West (34%) and Yorkshire and the Humber (28%). Despite these strong performances, there were signs of a slowdown in these areas with prices rising by less in the second quarter than in the preceding quarter.
Greater London and the South East (both 12%) have recorded the smallest price rises on the British mainland during the last year. As a result, the north/south1 divide has narrowed further with the average price in the south falling from a peak of 2.19 times higher than in the north in 2002 Quarter 2 to 1.74 times higher in 2004 Quarter 2. This has returned the north/south divide to close to the 1.69 average during the last 20 years.
Whilst the gap has narrowed significantly in proportionate terms and is now at its smallest for five years, in monetary terms the gap between the average price in the north and the south has more than doubled over this period from £43,300 in 1999 Quarter 2 to £90,700 to 2004 Quarter 2. The monetary gap, however, has fallen by nearly £8,200 since 2003 Quarter 1.
The average price in both West Midlands (£152,869) and East Anglia (£154,989) surpassed the £150,000 barrier for the first time during the second quarter, therefore joining Greater London, the South East and the South West above this mark.
First-time buyers are borrowing a smaller proportion of the purchase price ……
The number of first-time buyers has fallen significantly over the past few years, accounting for only 30% of all homebuyers in the first five months of 2004 compared with 43% in 2001, according to the Council of Mortgage Lenders (CML). Whilst there has been a downward trend in the number of first-time buyers, it is notable that those getting onto the housing ladder for the first time are borrowing a smaller proportion of the purchase price than before. During January to May 2004, first-time buyers took out a loan that averaged 87% of the purchase price. This compared with 95% in 1996 and 19972.
Higher interest rates and first-time buyers' difficulties entering the market are expected to cause house price inflation to slow.
There are increasing signs that the four interest rate rises since last November are beginning to curb housing demand. The increased cost of borrowing, combined with the increasing difficulties that aspiring first-time buyers face in getting onto the housing ladder, are expected to exert downward pressure on housing market activity and house price inflation over the coming months.
The rapid rise in house prices over the past few years in the north means that increasing numbers of first-time buyers now face similar difficulties to those in the south in getting onto the housing ladder. There are now signs that this is causing house price inflation in the north to slow. We expect this trend to continue during the second half of the year, contributing to slower UK house price inflation.
The market will, however, remain underpinned by a strong labour market, favourable affordability when mortgage-servicing costs are compared with income and a shortage of supply. As a result, we expect house prices to continue to rise albeit at a reduced pace.
1 South defined as London, the South East, the South West and East Anglia. The north defined as the rest of the UK.
2 Refers to median values.
