UK Housing Market

A look at the main UK housing market data.

  1. House prices
  2. Affordability of housing
  3. Interest rates
  4. Supply of housing

House price inflation

house-price-inflation-91-

Nationwide data

  • Annual house price inflation running at 5.3% in Q1 2016
  • London showed strongest housing market with prices rising more than other areas..
  • Price of a typical home is £198,564 (Q1 2016)

UK House prices in past few decades

nominal-UK-house-prices-91-

  • In 1969, average house prices were: £4,312
  • In 1975, average house prices were: £10,388.
  • In 1980, average house prices were: £22,676
  • In 2016, average house prices are: £198,564.

Real house prices

real-house-prices-91-uk
Real house prices are adjusted for the effects of inflation. This gives a more meaningful guide to how house prices have increased compared to typical prices in the economy.

This shows the real increase in house prices – rising faster than inflation.

Real house prices since 1975
real-house-prices-75-

  • In 1975, – average house prices (at 2014 prices) was £83,126.
  • In 2014 – average house prices – £188,810

126% increase in real house prices.

2. Affordability of Housing

First Time Buyers – House Price to Earnings Ratio

house-price-to-earnings-ratio

For UK first time buyers, the average house price is 5.1 times average earnings. In London, house prices are 9.2 times average earnings, whereas in the north, house prices are only 3.4 times average earnings.

Affordability of Mortgage Payments

mortgage-payments-income

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.

Affordability index

The nationwide also produce an affordability index. Index base year 1985=(100)

affordability-index

Interest rates in UK

base-rates-bank-rates-mortgage-rates

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.

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.

housing-completions

Understanding supply constraints in UK Housing market

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

Housing Construction

housing construction

UK housing construction. see also UK construction

Trends in housing tenure

trends-in-housing-tenure

Source: English Housing Survey 2013-14

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 and selling off council homes. Mrs Thatcher allowed the sale of council properties to their tenants. The stock of social housing has fallen since the early 1980s.

trends-in-housing-tenure-1980-2014

However, the trend in home ownership has been reversed in the last decade, due to declining affordability of home ownership.

local-housing

local authority housing stock has plummeted due to the popular right to buy scheme and transfer of housing stock to housing associations.

source: JRF Housing & Neighbourhood studies

Regional house prices

regional-house-prices

Regional trends in house price to income ratios

regional-house-prices-ratioSee more at: regional house prices

Historical House Prices

house-prices
UK nominal house prices

house-price-inflation-1970-2013

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

real-house-prices-75-16
real-house-prices-75-16

Even adjusted for inflation, we have seen strong growth in house prices. Real house prices

Mortgage defaults and arrears

reposession-rates

Mortgage default rate statistics are produced by Council of mortgage lenders (CML). See repossession rates

Housing Benefits

housing-benefits-number

Just under 5 million receive housing benefit, at an average of £93 a week. This is a rough annual cost of £23 billion.

More on UK Housing benefit

Renting sector

england-renting

Mortgage rates

mortgage-rates-uk

Source: B of E

Despite base interest rates of 0.5%, The standard variable rate for mortgages has crept up fro 4% towards 4.7% in 2016

Five year fixed rate mortgages (on 75% LTV) have fallen below 3%

Quantity of mortgage lending

secured-lending-individuals-b-e

Collapse in mortgage lending post 2007 financial crash.

Related

28 thoughts on “UK Housing Market

  1. Regional house price graph was really useful for me. Now I’m comparing house prices in the UK and the USA. Medium property in the United Kingdom is a bit more expensive than one in America. But houses in London and San Francisco, frontrunners in their countries, cost approximately equally — 521K GBP and 785K US dollars. Making a research I used date from the source https://tranio.com/usa/analytics/house_prices_rental_rates_and_yields_on_americas_top_residential_markets/

  2. i would be interested to see some of these graphs (i.e. affordability compared to income) up to 2016,

    concerned about the inevitable bubble, with people buying up second homes because ‘theres no better investment than property’ would be interesting to see if it compares with 2005-2007. may be helpful in predicting the next burst of the bubble.

    of course it could be on thursday if we leave the e.u.!

  3. Nice set: here are a few of my own that add an extra slant on some of the topics:

    http://a.disquscdn.com/uploads/mediaembed/images/3671/7344/original.jpg

    Shows that the “housing shortage” is a myth.

    http://a.disquscdn.com/uploads/mediaembed/images/3639/1923/original.jpg

    Shows that Council Housing has continued to transfer to Housing Associations, while BTL has been buying more than the total of new builds.

    http://a.disquscdn.com/uploads/mediaembed/images/3639/1301/original.jpg

    Numbers of first time buyers have stayed subdued, and well below the 400,000 a year that the CML had projected in a study in 2006.

    http://a.disquscdn.com/uploads/mediaembed/images/2649/6953/original.jpg

    Most sales are of second hand homes. Most supply of homes for net sale comes from executors and emigrants, not newbuilds.

    http://a.disquscdn.com/uploads/mediaembed/images/2616/7065/original.jpg

    Real house prices back to 1952.

    http://a.disquscdn.com/uploads/mediaembed/images/1984/6073/original.jpg

    Evidence that housebuilding does not cause house prices to fall – if anything, the relationship is the other way round: higher prices lead to an increase in building.

    http://a.disquscdn.com/uploads/mediaembed/images/1810/8174/original.jpg

    House prices are driven by the amount that banks will lend per mortgage – note this dropped after the financial crash, and so did house prices. You can’t pay what you can’t borrow.

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