Average UK house prices officially were on the up in 2020. The house prices are generally affected by multiple factors, like mortgage rates, supply, and demand of houses in the market. If the demand is greater than supply, then house prices are most likely to increase. All around Europe, the United Kingdom (UK) holds some of the highest average house prices.
As per UK House Price Index, the average house price in the United Kingdom as of March 2020 is £231,855 and the index is at 121.6. The UK average property prices decreased by 0.2% compared to the previous month and increased by 2.1% compared to the previous year.
According to the Office of National Statistics (ONS), in England, the average house price increased over the year to £248,000 (2.2%), while in Wales, it was £162,000 (1.1%), £152,000 (1.5%) in Scotland, and £141,000 (3.8%) in Northern Ireland.
The largest 12-month growth in the average house prices in London was seen in March 2020; an increase of 4.7% over the year. This increment is the largest 12-month growth in London average house price since December of 2016.
Regarding the property prices in the UK, The Office for National Statistics (ONS) issued a public statement on the coronavirus (COVID-19) and the development of statistics. In this report, the Measuring the data section explains the current situation in direct relation to the UK House Price Index (HPI), the price collection for this publication has been partially affected due to data availability issue in some areas.
Data for property price and the number of transactions from different states are still to be gathered and incorporated to generate a fully authentic report that can show the variations in average house prices. Until further notice from the April 2020 index (due to be released on 17 June 2020) the UK House Price Index HPI will be suspended.
Average UK house prices
The government said “home buyers should, if possible, postpone their move to a new house until steps are in place to counter coronavirus.” Although sellers continue to advertise their property, they have been cautioned against allowing any visitors to enter their homes for viewing. As a result, nearly 373,000 property transactions worth £ 82 billion are currently on hold.
Due to the safety measures introduced by the government from March 2020, to prevent the spread of Coronavirus (COVID-19), fewer transactions have been made and for UK HPI for the month of March, less data is available. Consequently, there may be some increase in volatility for this month’s estimates, particularly at the lower geographical levels where we have smaller transaction volumes.
The UK House Price Index (HPI) fundamentally works on the housing transactions that have been completed. A house purchase process usually takes six to eight weeks for its completion. Hence, the data about the average house price in the March 2020 UK HPI represents the completions that happened before the govt. safety measures for quarantine to prevent the spread of COVID-19.
Over the last three years, we see a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England, but annual growth has increased since December 2019.
Annual house price rates of change for all dwellings, UK, January 2006 to March 2020 – UK house prices
Figure 1: House price growth in the UK has generally slowed since mid-2016, but has picked up in recent months – UK house prices
The chart above shows the average house price growth in the UK from Jan 2006 to March 2020. We see a lot of variations; property prices going up and down. The largest hit was seen at the start of 2009 when the average house price reached its lowest rate of 157.2 thousand British Pounds. The property prices have been increasing since 2013, roughly on a quarterly basis. The largest change occurred from 2013 to 2014 where a 9% increase in the house price took place.
Figure 2: House price growth in the UK has generally slowed since mid-2016, but has picked up in recent months – UK house prices
The chart shown above shows an increasing trend in property rates. It did go down from 2007 to 2009, but since then it is going up gradually. The average UK house price in March 2020 was £232.000, which is £5,000 higher than the price in March 2019 (Figure 2).
If we consider the data on a non-seasonally adjusted basis, average house prices in the United Kingdom decreased by 0.2 percent between February 2020 and March 2020 while it was 0.3 percent in the same timeframe a year earlier i.e. in 2019.
Uncertainty around UK house prices
On a seasonally adjusted basis, average house prices in the United Kingdom rose by 0.1 percent between February 2020 and March 2020 following a fall in rates of 0.1 percent in the very previous month.
Global Consultancy Knight Frank forecasts that the house sales in the UK will collapse this year as the coronavirus pandemic freezes the property market. But these prices will fall by only 3% this year and will rebound by nearly 5% next year.
The reason for Knight Frank’s forecast is the assumption that the British economy will shrink by 4% in 2020 and grow by 4.5% next year as the pandemic recedes.
Do you agree with Knight Frank or are you under the impression they will be worst or even go up in value?