New figures show that average UK house price growth has declined to 7.2%. Additional figures indicate that the London market was a leading contributor to the decline. Property expert Simon Morris explores what this means for funds looking to invest in residential property.
The UK’s house price boom
Average UK house prices boomed in 2014. The economic recovery spurred activity in the market and caused average UK house price growth to peak at 12.1% in September 2014, up from 11.7% in August 2014, according to the Office for National Statistics (ONS).
The rise of house prices in London contributed to the boom. Data from the Centre for Economics and Business Research (CEBR) shows that the average London house price grew by 17.4% in 2014 and eclipsed the £500,000 mark.
House prices grow by 7.2%
However new figures suggest that house price growth has slowed. A report from the ONS says that the average UK house price increased at a rate of 7.2% in the year to February 2015. This is a drop from 8.4% in the year to January 2015.
London contributed to the fall. ONS figures show that the average price of a home in the UK capital fell £9,000 to £490,000 in the second month of 2015. Yet house prices rose at a rate of 14.2% annually in Northern Ireland and 10.7% in the year to February 2015 in the East of England.
House prices in 2015 and 2016
CEBR has predicted that house price growth in the rest of the UK will outstrip London throughout 2015. They estimate that the average London house price would fall by 3.6% in 2015 whilst the average residential property value in the rest of the UK would expand by 1.5%.
It’s a different story in 2016. CEBR predicted that the UK capital is set to resurge next year and that its house prices will grow by 2.7%. In contrast it expects the average house price throughout the rest of the country to increase by a rate of 2.3%.
What does this mean for funds and investors?
Has the bubble burst? ONS figures would seem to suggest so. They seem to indicate that residential property in London has entered a particularly steep decline. However predictions from CEBR may tell a different story. House prices are still growing and if predictions hold true, average house value rises in London will once again eclipse increases throughout the rest of the country in 2016.
What has been made clear to Simon Morris is that funds and investors will need to think carefully before they invest in the UK residential property market. Which region will prove profitable in the long-term? For example, now may be the time to invest in London residential property without the £500,000 price tag, but anyone who decides that this is the path they wish to take, needs to do their research and seek independent advice before they commit.