Fionnuala Earley, group economist at Nationwide, said: “The annual rate of house price growth in the UK remained stable in the second quarter, but the quarterly growth rate fell back sharply from 2.2 per cent to 0.9 per cent. England lagged behind the other parts of the UK with prices growing at 3.6 per cent over the year compared with the UK average of 4.8 per cent. Prices in Wales grew at the same rate as the UK average, but Scotland and Northern Ireland saw double-digit annual house price inflation of 10.7 per cent and 24.9 per cent respectively. Within England, the fastest annual rate of house price growth was in London where prices increased by 4.71 per cent in the last year, marginally faster than East Anglia (4.70 per cent) and Yorkshire and Humberside (4.67 per cent). The Northern region saw the slowest annual growth rate at a mere 1 per cent.
“Looking at house price movements between April and June, East Anglia and Northern Ireland were the only parts of the UK where the quarterly growth rate was higher in the second quarter of 2006 than the first."
Northern Irish and Scottish markets still booming
“The Northern Irish and Scottish housing markets are booming and, like their governments, have become increasingly devolved from the UK. At the beginning of 2005 Northern Ireland was the cheapest place to buy in the UK with prices at only 72 per cent of the UK average. With the price of a typical house there now costing £146,367, prices are now 89 per cent of the UK average. House prices in Northern Ireland are now higher than in the Northern region, Yorkshire and Humberside, Scotland and Wales.
“The annual rate of house price growth has consistently been in double digits in Northern Ireland for the last three years. And the rate of growth continues to accelerate. House prices in the Province grew more than five times faster than the UK average in the last 12 months. During the last quarter prices increased ten times faster. The continuing success of the Northern Irish economy, boosted by significant public investment in infrastructure has helped to support the housing market, although it is difficult to see this rate of growth being sustained in the longer term.
“In Scotland prices increased by 10.7 per cent over the last year as the annual rate of house price growth accelerated in the second quarter. However, while prices increased by a significant 2.6 per cent in the second quarter, there are signs of moderation. Prices rose more slowly in Q2 2006 than in either of the previous two quarters."
House price growth in the South outpaces the North
“House prices in the South of England have grown faster than the North for the third successive quarter. This follows three and a half years of the South lagging behind. The average rate of growth over the last year is the same in both halves of the country, but house price growth has gathered momentum in the South - albeit from a low base - while the North has seen some moderation."
London leads the way, as the ripple effect returns
“London pipped East Anglia and Yorkshire and Humberside at the post to become the region with the fastest rate of annual house prices growth in England in the second quarter of 2006. Prices in the capital grew by 4.7 per cent in the last 12 months, well above the average for England of 3.6 per cent, but just below the UK average of 4.8 per cent. The rate of growth has moderated since the first quarter, but remains stronger than at this time last year.
“The areas around London are also seeing higher growth compared with last year, suggesting the ripple effect is still relevant in the UK housing market. There is a clear pattern of acceleration in house price growth in the South in the regions closest to London, compared with last year. At the same time there is clear deceleration in all of the regions in the North. London, East Anglia, outer South East and outer Metropolitan areas are all seeing annual house price growth at around the same level or higher than at this time last year. In stark contrast all of the regions in the North of the country (Northern, Yorkshire and Humberside, North West, and the East and West Midlands) have seen a slowdown in the rate of annual house price inflation.
“While the quarterly rate of growth in London cooled slightly in the three months to June, house prices grew more rapidly in East Anglia. Prices in East Anglia grew by 2.2 per cent between April and June, faster than anywhere else in England. Indeed East Anglia and Northern Ireland were the only parts of the UK where the quarterly growth rate was higher in the second quarter of 2006 than in the first."
Supply pressures greatest in the South and Midlands
“Scarcity of housing supply is a major factor in the UK and one that will help to support house prices in the longer term. In England, Nationwide estimates based on government projections of households and average rates of growth in the housing stock, suggest that there may be as many as 200,000 frustrated households at the end of 2006 due to insufficient housing supply. Within the English regions, lack of supply is most pressing in the South. Population inflow to take up jobs has provided extra demand, but supply responses are notoriously slow. Nationwide estimates suggest there is an increasing gap between the available stock and the projected number of households. In London and the South East this could be as much as 112,000 in 2006. But the pressures are spreading beyond London too. According to our estimates, East Anglia and the Midlands could together face a deficit of 70,000."
