House price growth holding steady as Orkney registers UK’s biggest rise

The biggest change of anywhere in the UK was in Orkney where the average price is 28 per cent higher than a year ago at £148,000.

The average annual rate of increase is running at 4.9 per cent, down from 5 per cent in May, while prices rose 0.8 per cent between May and June.

The Office for National Statistics (ONS) figures show the wide variation in price movements across the UK.

While Orkney registered a 28 per cent year-on-year rise in June, the average price of London home fell £3,000 to £482,000, while a house in the North East of England gained £2,000 to £130,000.

The ONS analysis of the housing market is widely followed because it is based on actual transactions compiled by the Land Registry and shows movements at a local level.

In the City of London, the average dropped by 20 per cent to £724,000.

The ONS said: “While the annual growth rate has slowed since mid-2016 it has remained broadly around 5 per cent during 2017”.

Richard Snook, senior economist at PwC, said: “In cash terms,house prices in Scotland and Wales are only just returning to their pre-recession peak levels. Wales surpassed the October 2007 peak of £150,000 for the first time this month, reaching £152,000. Whilst in Scotland prices remain just below the May 2008 peak of £146,000 at £144,000 in June 2017.

“Prices in Northern Ireland remain around 40% below their pre-recession peak at £129,000 in June 2017. They had reached £225,000 in September 2007 having been caught up in the wider property bubble.

“England is the only part of the UK where prices now significantly surpass their previous peak, with average house prices having risen from £195,000 in September 2007 to £238,000 today.”

Also reacting to the news, Howard Archer, Chief Economic Advisor to the EY ITEM Club, said: “House prices look unlikely to rise by more than 2 per cent over 2017 and could well be essentially flat over 2018.

“The fundamentals for house buyers are likely to remain weak over the coming months with consumers’ purchasing power continuing to be squeezed by inflation running higher than earnings growth. Additionally, housing market activity is likely to be hampered by weakened consumer confidence and limited willingness to engage in major transactions. Indeed, GFK reported a further drop in consumer confidence in July to its lowest level for a year, with a decline in the major purchase index.

“Housing market activity and prices are also likely to be pressurised by stretched house prices to earnings ratios and tight checking of prospective mortgage borrowers by lenders. According to the Halifax, the house price to earnings ratio reached 5.80 in December (the highest level since August 2007) and was still as high as 5.65 in July. This is well above the long-term (1983-2017) average of 4.19. Furthermore, mortgage lenders are under pressure from the Bank of England (BoE) to tighten their lending standards.”