Property prices since the credit crunch

publication date: Sep 5, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

What's happening to property prices to date?

March and April's spike in sales and prices dampen summer market performance

Most of the reports are struggling to find much to talk about over the summer. Key commentary from the Land Registry and Acadametrics show property prices have risen, while Nationwide mortgage data shows house prices have fallen. Overall though, sales appear to be down.

Chart showing average property prices since 2011 in England and Wales

Average property prices since 2011 England and Wales

Key facts about average property prices in England and Wales from January to June 2012:-

  • An ‘average property' price for mortgaged properties has fluctuated between £162k - £165k for Nationwide
  • Average property prices, including cash sales, by the Land Registry hardly changed: £161k - £161.8k
  • Average property prices for all properties from Acadametrics shows a range between £219k and £224k
  • Property prices in June, on average, are approximately:- 
  • 6.8% above the lows of 2009 for Land Registry
  • 12.2% above the lows of 2009 for Nationwide
  • 12.1% above the lows of 2009 for Acadametrics
  • Average property price performance varies dramatically from one area to another. Three regions, including the North East and West, Yorkshire and Humber, according to the Land Registry, have fallen below 2009 lows
  • Only the London region has outperformed 2007 price heights, with prices just 2.27% above the heights, which taking into account inflation, means property prices still have some way to rise for properties to maintain their value
  • Land Registry average property prices June 2012 versus January 2011 have only changed by 1%
  • Nationwide average property prices June 2012 versus January 2011 have only changed by -1%
  • Acadametric's average property prices June 2012 versus January 2011 have only changed by 2.5%
  • Northern Ireland continues to be the place worst hit by the credit crunch

Market Commentary
According to Roger Gardner, Nationwide's Chief Economist, "UK house prices slipped back in June 2012 and are 1.5% lower than one year ago". Land Registry claims prices are up 0.9% year on year and Acadametrics data shows a big increase of 3%. However, the reality is prices are unlikely to have actually changed that much throughout May and June at all.

Dr Peter Williams of Acadametrics points out "it is important that this 3% rise be correctly interpreted as it reflects, not so much the June 2012 market, but the market in June 2011". Back in June 2011, prices fell following a rush of buyers in April 2011 trying to avoid the additional 1% Stamp Duty tax on properties costing £1 million and more. As Acadametrics and Land Registry include cash sales (which Nationwide doesn't) the rise in June 2012 is really a reflection of low prices in June 2011. In addition, Land Registry data is a few months older, so the recorded rise is likely to still reflect busy activity in March and April 2012.

In conclusion, bearing in mind the statistical anomalies, the reality for May/June overall is prices were flat to falling.

From a volume perspective, activity wasn't great as there were few real incentives for people to buy.

In previous months, first time buyers helped to keep the market statistics buoyant. Nationwide calculate "Mortgage lending to first time buyers in March totalled £3bn, around 40% above usual levels." They believe this was due to the average £1,800 saving the zero Stamp Duty to £250,000 gave over 200,000 first time buyers.

Acadametrics agrees with Nationwide via their LSL First Time Buyer Index. They confirm April was an appalling month with just 12,000 sales to first time buyers. However, the good news is activity did pick up in May. David Newnes, director of LSL Property Services, owners of Your Move and Reeds Rains (who sponsor the Acadametrics data) said: "First time buyer transactions rose by 28% in May to 16,170 following a sharp decline in April in the wake of the return of stamp duty for first‐time purchases." According to their index, contrary to many media headlines of the average first time buyer being over 40 years old, the reality is the average age of a first time buyer in May was "28 and they had an income of £36,000"

Although first time buyers have renewed activity, rather than any exciting ‘must buy' incentives, other factors such as the weather and Jubilee holidays hampered people's desire to house hunt and secure a deal.

Dr Peter Williams , Chairman of Acadametrics comments "transactions hit a near record low in June, with an estimated 57,000 sales taking place" apparently this was due to "a combination of record rainfall and the Queen's Jubilee which conspired to disrupt buyer activity and prices in the short-term."

Regional data is the key to understanding what's happening in your area though and can widely differ by property and street even at a local level. The latest data from the Land Registry shows Scotland is recovering well, as is the South East and London.  Areas in red are in a severe ‘double dip' house price wise, and don't look like they are showing signs of any recovery. In fact, prices still seem, on average, to be suffering in these areas.

Land Registry Regional Chart June 12

*              Source - Bank of Ireland (Q1 12)
**           Source - (June 12)

What's happening in your town?
Even at a regional level, your property price or the value of the property you want to buy can be going up when the regional data says, on average, prices are going down. Here's the latest on major cities in and around the UK in June 2012.   

As the information shows, six cities are struggling and have fallen into double dip from a property price perspective with areas such as Birmingham and Sheffield not far behind. The Scottish cities of Edinburgh and Glasgow are doing well as is London. Cardiff, Bristol and Bournemouth are only 10% behind, but when taking into account inflation (ie the cost of goods) has risen by around 10% since 2007, they need to rise by 20% for property prices to just stand still in real terms.

 Land Registry Cities Chart

*              Source - Bank of Ireland (Q1 12)
**           Source - (June 12)

According to Your Move’s Gordon Fowlis, Regional Managing Director and Acadametric’s Scottish index “Prices are flat, but are higher than they were at the beginning of the year. Homeowners and prospective buyers have every reason to be cautiously optimistic now that we’re beginning to see some green shoots of recovery. More first time buyers accessed mortgages in May, although there is still an unhealthy reliance on wealthier borrowers and landlords when it comes to sales levels.”


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