London house prices are 36% higher than pre-crisis peak

17th February 2015

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London house prices are 36.4% higher than the pre-economic downturn peak of January 2008, at £502,000 in December, official figures reveal.

However, prices in the capital are below their more recent peak of £514,000 in August 2014, according to the Office for National Statistics’ data.

Across the UK,  first-time buyers paid 9.5% more in December than year earlier on average, down from 11% in November,.

UK house prices increased by 9.8% in the year to December 2014, down from 9.9% in the year to November 2014.

House price annual inflation was 10.2% in England, 4.0% in Wales, 5.5% in Scotland and 4.9% in Northern Ireland.

House prices continue to increase strongly across the majority of the UK, with prices in London again showing the highest growth.

Annual house price increases in England were driven by an annual increase in London of 13.3% and to a lesser extent increases in the South East (11.5%) and the East (11.4%).

In December 2014, prices paid by first-time buyers were 9.5% higher on average than in December 2013. For owner-occupiers (existing owners), prices increased by 9.8% for the same period.

UK average house prices increased by 9.8% over the year to December 2014, down from an increase of 9.9% in the year to November 2014. This follows the house price increases the UK has experienced since April 2012 and is driven in large part by increases in London. The average UK house price in December 2014 was £272,000.

Average house prices in December 2014 stood at £285,000 in England, £173,000 in Wales, £142,000 in Northern Ireland and £193,000 in Scotland.

In December 2014, London continued to be the English region with the highest average house price at £502,000 and the North East had the lowest average house price at £153,000.

The average price for properties bought by first-time buyers increased by 9.5% over the year to December 2014, down from an increase of 11.0% in November 2014.

In December 2014 the average price paid for a house by a first-time buyer was £208,000. The average price for properties bought by home movers increased by 9.8% in the year to December 2014, up from an increase of 9.4% in November 2014. In December 2014, the average price paid for a house by a home mover was £314,000.

Wales house prices surpassed their previous peak of January 2008 and are now at record levels. The index for Wales reached a record level of 222.7.

The England index reached 204.7 in December 2014. This is up slightly from November 2014 but 0.3% below the record level of 205.3 in August 2014. However, house prices in England are 13.2% higher than the pre-economic downturn peak in January 2008 of 180.8.

The index for Northern Ireland (153.5) in December 2014 is 45.5% below the peak of August 2007 (281.5).

The index for Scotland (227.3) in December 2014 is 3.2% below the record level witnessed in August 2014 (234.9). Scotland prices are now 1.4% lower than the pre-economic downturn peak of June 2008 (230.6).

Stephen Smith, director  of mortgage club and housing at Legal & General, said:  “Today’s data shows that house prices are once again rising. While homeowners may welcome an increase in their property value, this is not necessarily positive. For the market to grow in a sustainable and healthy way, it is important that house prices do not rise too quickly. Increases above the rate of inflation stop those on lower incomes and first time buyers from being able to afford a house.

“To ease the pressure on house prices, we need to build more homes. Demand still outstrips supply in the UK, particularly in areas such as London and the South East. The general election has brought this issue to the top of the political agenda and it will be essential that whoever wins the election makes good on their promises and address the issue. ”

Brian Murphy, head of lending at Mortgage Advice Bureau, added: “Annual gains of 10 per cent are still high, but the signs are that the housing market is beginning to move towards a more stable trajectory.

“Crucially, house price rises have still left the door open to first-time buyers, with more loans to new homeowners in 2014 than any year since the financial crisis. Despite the Mortgage Market Review (MMR) being followed by new loan-to-income caps, first time buyers still have an increasing number of products to choose from – particularly at high loan-to-values (LTVs) thanks to the influence of Help to Buy.”

Murphy said December’s stamp duty changes have given further encouragement to buyers at the lower end of the market and helped them regain some of the ground lost to rapid house price inflation last year.

He added: “The more settled rate of growth expected in 2015 should help more buyers to get a foot on the property ladder. Mortgage pricing is hugely attractive and the raft of affordability checks and balances will ensure that people are not borrowing beyond their means.”

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