New data has indicated that average UK house price growth took a slight dip in July 2015, leading Simon Morris to discuss whether UK residential property is still a good opportunity for investors.
A wide array of evidence seems to suggest that the UK’s residential property market has recovered from the economic crash in 2007/2008 that drove it to historic lows. Consistent figures indicate that the market is growing again, and that average UK house prices are expanding month-on-month.
All we have to do is look at the Office for National Statistics’ (ONS) monthly House Price Indexes to illustrate this point. The May 2015 House Price Index indicated that the UK average house price grew 5.6% in the year to May 2015, up from 5.5% in the year to April 2015. Meanwhile, the June 2015 House Price Index suggested that the average UK house price expanded 5.7% in the year to June 2015.
July House Price Index
The ONS has now released the July 2015 House Price Index, which shows that the average UK house price expanded just 5.2%, to £282,0000, in the 12 months to July 2015. When you remove London and the South East from the equation, the UK’s average house price growth measured just 4.4% within this period.
It’s clear that London still has the highest average house price in the UK, at £525,000, whilst at £156,000 per property, the North-East of England recorded the lowest average house price. The ONS also revealed that annual house price inflation hit 5.6% in England, 7.4% in Northern Ireland and 0.3% in Wales, but was down 1.3% in Scotland.
Sitting on their hands
Rob Weaver, director of property at residential investment platform Property Partner commented on the figures. He was quoted by Property Wire saying: “Many households are almost certainly wary of not being able to secure a mortgage under the new lending rules, and that could be impacting their intent to move. Households have almost certainly become more conservative in the wake of the global financial crisis. Paying debt down has become more appealing than racking it up.”
He went on to note: “Many are doubtless sitting on their hands until the economic picture gets clearer because the recovery has become less definitive during the first half of the year. This latest data shows that the property market has become a lot more balanced, with sustainable levels of price growth across a number of regions. It is almost a relief to see prices in the capital growing at 5.5%, compared to the high double digit growth rates of a two years ago.”
The latest ONS house price index does seem to suggest that the UK’s residential market is cooling, but nevertheless continues to grow. This may lead investors to believe that now is the time to invest in lucrative markets such as London’s, where even now it’s possible to buy a residential property for less than £500,000, to turn a profit when the market picks up.
Simon Morris would advise investors to do their research before they pursue this strategy. We don’t really have a clear indicator of how the UK’s residential property market will progress throughout the rest of 2015, so caution must be practiced and research must be conducted to ensure investors weigh up risks and rewards, before investing in residential property.