This represents a decline of 1.4% from the 8.9% recorded last month and the fifth month in succession in which the annual rate of house price inflation has fallen. Each month has shown a faster rate of decline than the preceding month, indicating a sustained reduction in house price inflation at the aggregate level.
In January, the average price paid for a home in England & Wales was £277,857. This was an increase of £700, or 0.3% over December, almost exactly matching the fall in prices that month. The average house price is now just £25 lower than it was at the end of November 2014 - the average price has effectively been at a standstill since then.
Adrian Gill, director of Reeds Rains and Your Move estate agents, comments:
“January’s 7.5% annual growth is the smallest yearly improvement witnessed for 10 months, and represents a deceleration from 8.9% in December as house price inflation continues to flag. After some recent price falls, average property values haven’t taken any steps forward from where they stood in November – and what we’re seeing is a far cry from the marathon of monthly increases that set off this time last year."
The Index shows London is leading the slowdown, with average London house prices experiencing the biggest drop during December (1.1%).
LSL attributed the slowdown to a combination of the upcoming General Election, the continued slow recovery in the economy, and a tighter mortgage market, with slowing prices generating uncertainty amongst both buyers and sellers and therefore reducing the pressure to complete the transaction.
Adrian Gill continues:
“The London story acts as a miniature model of what’s happening in the rest of the UK housing market. The market is temporarily treading water at the higher end, but fast-moving in areas where price growth has been more modest, and where cheaper properties are within reach of new buyers and borrowers who can access Help to Buy. For instance, when you exclude the colossal London and the South East from the equation, the slowdown in annual price growth is much shallower, as growth across other parts of the country continue to sail along steadily.
"The North saw the biggest uplift in prices in December, while property values made similarly positive progress in Yorkshire & Humberside, and Wales. In these areas demand is thriving as buyers enjoy the perfect storm of record low mortgage rates, more affordable house prices and lower stamp duty costs, and the best properties are being snapped up quickly. Coupling those conditions with steady price growth, buyers are seeing many reasons to act now.
“While sales volumes across the south are slightly more sluggish, the North is the current powerhouse of activity, with completed home sales up 7.0% year-on-year during Q4 2014, followed by 4.1% annual increase in Yorkshire & Humberside. This growth is built on sustained first-time buyer appetite for homes, and as this slice of the market continues to grow, flats and terraces are changing hands at the fastest pace – as the property type most common among new buyers. For example, Yorkshire & Humberside have seen the most significant jump in flat sales during Q4 2014, up 18.6% year-on-year.
“Overall, completed home sales in January dipped a slight 0.5% compared to a year ago, but with Stamp Duty savings now sweetening the deal and low mortgage rates fostering a host of competitive long-term fixes, homeownership is spreading its wings and breeding further confidence in the market – all in all, it’s a promising start to the New Year.”
