A look at the main UK housing market data.
- House prices
- Affordability of housing
- Interest rates
- Supply of housing
House price inflation
- 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
- 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 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
- 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
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 as % of income reached 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 the 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.
Further reading: UK housing affordability
4. Housing Supply
During 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
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.
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.
source: JRF Housing & Neighbourhood studies
Regional house prices
Regional trends in house price to income ratios
See more at: regional house prices
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
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
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
Collapse in mortgage lending post 2007 financial crash.