House prices in England and Wales increased by 2.5% in January, adding over £4,700 to the average property value, according to data from the Land Registry.
The Land Registry believes that a decline in the number of homes coming onto the market, combined with the announcement of higher Stamp Duty charges for buy-to-let landlords and second homebuyers, boosted demand and prices.
The figures, based on sales registered during January, showed the largest monthly house price growth since June 2002.
The average property price has now grown to £191,812 and the annual rate of price growth rose to 7.1%, from 5.5% in December.
The greatest monthly increase was seen in Wales, where prices rose by 3.7% to an average of £125,665.
London experienced an average price increase of 2.8% over January, and prices are now 13.9% higher than last year at £530,409.
Prices fell in the North West and North East, by 0.4% and 1.6% respectively, with just slight annual rises.
The Land Registry’s most recent transaction figures, for November 2015, indicate that the number of sales fell significantly over the month, from 83,763 in October, to 72,167.
This was the lowest figure for November in three years and the possible result of fewer homes coming onto the market during 2015. The Royal Institution of Chartered Surveyors (RICS) has been reporting a lack of stock for sale for almost a year.
A former RICS chairman who now runs an estate agent in north London, Jeremy Leaf, comments: “The decline in number of property transactions continues to be a worry. If people aren’t able to move in and out of the market when they want to, there will be an inevitable knock-on effect for the rest of the economy.”
However, lenders have reported a busy January for the mortgage market, with the British Bankers’ Association stating that its members had approved a third more mortgages in January than in the same month last year.
However, Hometrack recently warned that the recent announcement of an EU referendum in June might cause a slowdown in the housing market.
The Chairman of estate agent Jackson-Stops & Staff, Nick Leeming, claims that until the outcome of the vote is known, “there will be short-term interruption to the property market”.
He continues: “The market will also be eagerly awaiting the outcome of the Budget announcement in mid-March to see what impact, if any, it has on issues such as Stamp Duty, buy-to-let investment and the chronic shortage of new homes.
“The usual spring buying season may be temporarily interrupted by this uncertainty, but the influencers that have kept the market strong – a shortage of housing stock, interest rates destined to stay low according to the Bank of England and competitive mortgage rates – will still be in place come June.”1
It is expected that after the extra 3% Stamp Duty charge is implemented for landlords in April, that the rush of investors currently heading for the housing market will slow down.
In the past year, Land Registry data shows that the greatest increase in house prices was seen in Reading, where values rose by 16.1% to an average of £270,146. Other areas that experienced high price increases were also within the London commuter belt.
Leaf explains: “Buyers are finding better value than in London, although if property prices continue to rise at the same pace, that may no longer be true.
“With trains taking only half an hour into Paddington, you can get there faster from Reading than the suburbs, while living in parts of Berkshire will mean a reasonable quality of life.”1