A look at the main UK housing market data.
- House prices
- Affordability of housing
- Interest rates
- Supply of housing
House price inflation
- The price of a typical UK house increased by 1.1% between May 2012 and May 2013
- Prices 0.7% lower than one year ago
- Price of a typical home is £167,912 (June 2013)
UK House prices in past decade
House prices in the post-war period
2. Affordability of Housing
First Time Buyers – House Price to Earnings Ratio
For UK first time buyers, the average house price is 4.4 times average earnings. In London, house prices are 6.8 times average earnings, whereas in the north, house prices are only 3.2 times average earnings.
Affordability of Mortgage Payments
Mortgage payments as % of income reached in a peak in late 1989/90 due to record high interest rates. Rising house prices meant that the % of mortgage payments grew in the 2000s. However in 2009, interest rates were cut to 0.5% leading to lower mortgage payments for homeowners.
The nationwide also produce an affordability index. Index base year 1985=(100)
Interest rates in UK
interest rates at the Bank of England
There has been a dramatic fall in Bank of England base rates (which has continued to remain at 0.5%) but the bank’s standard variable rates have fallen at a much lower rate. See more at explaining the gap between base rates and commercial lending rates.
Source: ONS mortgage survey 2012
Further reading: UK housing affordability
4. Housing Supply
In the post war period, construction of local government housing increased supply. Home builds reached over 400,00 a year in the late 1960s. However, from the 1980s, the government retreated from building houses, leaving it to the private sector and a small contribution from housing associations. Due to strict planning legislation, the supply of housing has failed to meet government targets.
For example, in 2007, the government estimated they would need to build 240,000 homes a year until 2016, to keep up with growing demand. However, after the credit crunch, housing completions fell to 100,00 a year
more data on housing market supply and future population trends
UK housing construction. see also UK construction
Type of Property
Between 1950 and the early 1980s, the percentage of homes which were bought, steadily increased, and the renting sector fell. Mrs Thatcher encouraged this trend in the 1980s, with a policy of encouraging home ownership. Mrs Thatcher allowed the sale of council properties to their tenants. The stock of social housing has fallen since the early 1980s.
However, the trend in home ownership has been reversed in the last decade, due to declining affordability of home ownership.
local authority housing stock has plummeted due to the popular right to buy scheme and transfer of housing stock to housing associations.
Historical House Prices
The volatility of UK house prices. Though it should be noted these statistics show nominal house price changes. In the 1970s, high inflation rates magnified the nominal house price rises.
House prices adjusted for inflation
Even adjusted for inflation, we have seen strong growth in house prices. Real house prices
Mortgage defaults and arrears
Mortgage default rate statistics are produced by Council of mortgage lenders (CML). See repossession rates