House prices fall one per cent in 2012 wiping out 2011’s small rise

3rd January 2013

The average price of a house in the United Kingdom declined by one per cent in 2012 according to the Nationwide house price survey. The annual fall exactly reversed the one per cent gain in 2011.

This means that a typical home is worth £162,262. The survey also found that the North South house price divide continued to widen. The monthly price fell 0.1 per cent in December with prices falling slightly for the tenth month in a row.

Nationwide’s chief economist Robert Gardner says: “Given that the UK economy was in recession for much of 2012 a one per decline in house prices may be seen as a resilient performance. However the fact that prices declined even though employment rose strongly suggests that conditions remain fragile especially since other signs of housing market activity such as the number of mortgage approvals remain subdued, well below their long term averages.

“Continued low interest rates and policy measures such as the Funding for Lending Scheme should provide some support. But, with the economic recovery expected to remain fairly weak, the housing market is likely to be characterised by low levels of activity again in 2013, with prices remaining flat or modestly lower over the course of the year.”

The lender also says that the high levels of employment remain a bit of a puzzle given flat economic growth. Higher employment usually supports prices but as Nationwide points out average wages are now at 2004 levels.

The building society says that while demand remains weak so has the supply of properties. Low interests have dampened the number of forced sales and this coupled with a dearth of building activity means there has been no glut of unsold homes.

Gardner says that while demand remained weak, supply and demand were evenly matched.

The nations of the UK saw widely divergent fortunes in terms of house prices. In England prices fell just 0.4 per cent on average, Wales saw a fall of 2.7 per cent, Scotland saw a dip of 3.3 per cent but Northern Ireland saw a painful fall of 8.2 per cent. The Northern Irish correction has been huge since 2007 falling 50 per cent compared with the UK average of 11 per cent since the financial and economic crisis struck.

The price gap between houses in the North and South widened with the price of a typical home in the South now around £95,000 more than in the North – a new high and around 2 per cent more than the end of last year. London and the South West were the two regions of the United Kingdom which saw price rises in the last twelve months with falls everywhere else as shown by the table below.

Regional prices and percentage change over the last 12 months

London                       £300,361                                 0.7%

South West                £184,625                                 0.2%

Outer South East       £198,009                                 -0.2%

Outer Metropolitan     £246,453                                 -0.2%

West Midlands           £144,972                                 -0.8%

East Midlands            £138,486                                 -0.8%

North                         £114,264                                 -1.3%

North West                £133,253                                 -1.6%

East Anglia                £164,701                                 -1.9%

Yorks & Humberside  £131,046                                 -2.5%

Wales                        £131,630                                 -2.7%

Scotland                    £131,795                                 -3.3%

Northern Ireland
       £104,282                                 -8.2%


23 thoughts on “House prices fall one per cent in 2012 wiping out 2011’s small rise”

  1. JW says:

    Hi Shaun
    The plug has been pulled. The 99% are being put back in their box.You instance Spain today, but it can be anywhere. Power and financial well-being for the few is all that counts and is reflected in the policies being employed across the world. Financial repression, depression, oppression.
    NB Real are just obscene.

    1. Anonymous says:

      Hi JW

      One of the lessons of the credit crunch is that the consequences are ever more complex. When I warned about Spain entering a depression I thought it would have consequences for all of the Primera Liga including Real and Barca. It turns out that the downturn has completely bypassed the latter two. In many ways the big clubs in Europe have decoupled from their underlying leagues.

  2. Noo 2 Economics says:

    Hi Shaun, isn’t this “improvement” an expression of the increasing money supply over the last 6 months? I am expecting similar good news from Portugal, France and Greece (they really need it) over the next 6 months.

    If I am right I feel the improvement wil be temporary (meant in the old fashioned defintion of “temporary”) because of the effects of the strait jacket of austerity and a highly valued Euro. Of course, if the Euro was to devalue (which would help German exports) and austerity were to be relaxed in some way which seems to be spoken about more and more these days as the penny finally drops that front loaded austerity doesn’t work, then this could become sustainable with careful calibration of fiscal expenditure.

    Then again, when did the EZ or UK for that matter ever succeed at operational implementation of anything?

    1. Anonymous says:

      Hi Noo2

      You make a valid point but once we move into what has happened then matters become a lot greyer.

      For example exactly how has the improved money supply led to an increase in external demand or exports? A mechanism might exist if say the increased money supply had led to a weaker Euro but at 1.33 versus the US $ and just over 1.14 versus the pound £ it looks fairly strong.

      If we move to the domestic economy we are still seeing a slowdown so the best it might have done here is reduced the size of the slowdown. Has it ? That is hard to say with the waters being muddied even further by the VAT rises last September.

      As to the future a lot depends on how the austerity saga now plays out…

      1. therrawbuzzin says:

        Once again, people seem to be looking at austerity as an economic policy; it isn’t, it’s a social policy with economic repercussions.

  3. Mike from Enfield says:

    Hi Shaun,

    You say that IMF austerity boosts trade figures but suppresses domestic demand. Is it a case of falling real wages making exports more competitive at the expense of disposable incomes or is there more to it than that? Is there no quid pro quo for companies in higher business taxes too?

    I smiled at the suggestion of falling food bills. Spain may perhaps be very different but when I peer nosily into most people’s shopping baskets, I see an awful lot of sweets, cakes, crisps, biscuits, pop, snacks & treats which could be removed without anyone ending up hungry!

    Concerning Tottenham being a one-man team: the BBC’s More or Less program looked into this and made some quite surprising conclusions (April 27th edition, available for download).

    1. Anonymous says:

      Hi Mike

      I will take a look although for some reason April appears to be blocked out. As to the IMF the other essential part of the package is reform of whatever got the country into the circumstances that required a bailout, often the labour market but not always.

      Apologies by the way if you are a Spurs fan ( and to any others reading this)

      1. Mike from Enfield says:

        Hi Shaun,
        Just like to clarify…not a Spurs fan!

  4. arrbee says:

    I’m not sure that football finances are that different to those elsewhere – there is a comment in an article on the BBC website that Real have yet to finish paying for another player, Modric, who they bought from Tottenham last year.
    In another sign of the times, I’ve heard a number of people mention Spain’s straitened circumstances following on from Top Gear’s sensitive treatment of the subject a couple of weeks ago.

    1. Anonymous says:

      Hi arrbee

      Yes transfer payments are always quoted as a lump sum but in fact are often paid in installments. I guess that is just another sign of the times….

  5. Anonymous says:

    Hi from Greece, don’t know about numbers, but restaurants and seaside resorts are full and people enjoy the good weather and food. Yes, there is hardship but I think the black economy (e.g. illegal work which counts as unemployment) is thriving. Probably it has never been so obvious and so necessary to survive.

    1. Anonymous says:

      Hi Vassilis

      Nice to hear from you again. I thought I would just pass on these messages I have seen on twitter in the last 24 hours and ask for you thoughts.


      “Do you want that to go?” Last McDonalds in Thessaloniki (Greece’s 2nd largest city) to close down tomorrow. Just 3 outlets left in Greece.”


      “Teacher Dude ‏@teacherdude

      @notayesmansecon Starbucks is losing customers and still refuses to drop prices. By next year many of those will be gone, is my guess.”

      Your thoughts?

      1. Anonymous says:

        McDonalds? Starbucks?

        You must be kidding me. The lowest of the low in food and coffee quality.

        If you go to Thessaloniki I strongly recommend Mikel for coffee (I have seen so many new shops in Thessaloniki that I can hardly believe it)

        Mikel started in Larissa

        and I know many very good tavernas and restaurants (some very new)

        Please avoid McDonalds and Starbucks. They might be cheaper but very bad quality.

      2. Eric says:

        Only 3 McDo’s left in Greece. Some might say there’s some good news coming out of this dreadful mess at last.

        1. Anonymous says:

          Hi Eric

          I take your (and Vassilis’s) point about Mc Donalds. But as it has done well out of the credit crunch being a relatively cheap way to eat out, it makes me wonder if even it is too expensive in Greece now…

    2. therrawbuzzin says:

      Yeia sas Vassili. I pray that this benefits as many of your countryfolk as possible Vassili..

  6. realfinney says:

    Seems that things are bad enough in Spain they’re resorting to taxing sunshine:

    1. Anonymous says:

      Hi realfinney

      Thanks for a fascinating but in a way bizarre link, after all isn’t solar power supposed to be encouraged? And of course Spain is a good spot for it.

      For those who haven’t clicked on the link you get the gist from this sentence.

      “So solar power at home is encouraged in overcast Germany and Holland, but discouraged in sunny Spain. Makes perfect sense.”

      1. Anonymous says:

        Shaun, the Spanish electricity sector is perhaps the most bizarre in Europe (though ours is also just a little odd…). Unbilled price increases approaching €30bn are on the state balance sheet and Brussels is pushing to have that number included in the official borrowings total, as it should be but right now is not. This huge slab of debt has resulted from a decade of political cowardice (nobody wanted to charge the real price of ‘la luz’), compounded by astonishingly generous subsidies for small and medium solar arrays. Finally the PP is thinking of doing something. They have not just reneged on subsidies for solar arrays but they have gone the other way and are now penalising solar generation. As you say, it’s the country for panels, and of course there are a lot about. Some (less savvy?) array owners are going bust (income < finance and servicing costs), others have seen what was a juicy retirement opportunity vaporise before their eyes. The problem of course is that compared with conventional generation, solar is not viable and I hear it doesn't work at night. So large subsidies are needed. But Spain simply can't afford them, and in fact never could. Result: political mess of the first order.

  7. pavlaki says:

    As I mentioned recently, I expect a short term pick up in the service sector in the Eurozone due to ‘austerity fatigue’ and the fact that summer is here and folk are determined to live a little. Far more important will be the winter period numbers. If these show an improvement then southern Europe may have turned a corner. Unfortunately we will not get these numbers for some time.

  8. therrawbuzzin says:

    Mr Richards, the increase in non-hotel holiday accommodation means that the food position for poorer Spaniards is worse than the bald figures suggest, as that type of accommodation rarely includes meals.

    1. Anonymous says:


      Thanks, I will be watching future news on this subject closely.

  9. Anonymous says:

    However Spain is putting in a very good trade performance right now which is doing its best to offset the troubles in its domestic economy.

    Yes, so it seems. I find that all the more surprising when you consider that they are exporting in Euros, that is, they have no ‘devaluation advantage’ that Sterling is said to be able to confer. I suppose it shows that price is not everything when selling abroad, and quality, design, delivery, spares, back-up and all the rest are equally important, if not more so. See Germany for a country that really understands the importance of total quality.

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