The latest Office for National Statistics report has indicated that the growth of the property market is slowing. Additionally, the report shows that London is no longer the leader in UK property inflation.
Prices of houses within the U.K increased by 7.2% in the 12 months leading up to February 2015. In comparison, year on year growth in January was at 8.4%.
London in particular has seen a substantial slowdown in growth in the recent period. House prices in England’s capital were still 9.4% higher than in February 2014, but this indicates the smallest annual increase for a number of months. In January, annual growth was recorded to be 13%.
The average price of a house in London was £490, 000 in February, £9,000 less than the previous month. Initial reaction would suggest this could be down to the change of stamp duty introduced by the Chancellor in December. Other experts are pointing the Labour party’s proposed ‘mansion tax,’ for all properties over £2m, should they win the election, as another reason why growth has slowed.
Many experts have suggested that changes to stamp duty regulations have played a key part in slowing London’s high-value property selling. Under the new rules, buyers purchasing a house for more than £937,000 face a larger stamp duty bill.
During the first three months of 2015, 638 transactions in excess of this price occurred, dropping significantly from 949 in the same period in 2014.
With London recording slower growth than in recent times, other regions have taken over at the top of the UK property price inflation league. Northern Ireland boasted an annual increase of 14.2% in February, with the East of England recording a growth of 10.7%. This rise in the East of England means that inflation of property prices now stands at a record level for the region.
UK house price growth slows
Stephen Smith, director of Legal and General Mortgage Club and Housing, acknowledged that, ‘house price growth has slowed since the end of 2014.’ However, he went on to suggest that, ‘although it might not seem like it, this is actually good news for the housing market,’ as price rises that are too sharp can prevent people from getting on the property ladder.’
Mr Smith believes that in an ideal world, ‘house prices would grow at roughly the same rate as inflation, so that prices don’t rise faster than potential buyers can save a deposit.’ He believes that a step in this direction would be for more houses to be built, ‘so that demand keeps pace with supply.’
The Office of National Statistics report stated that, ‘annual house price growth is showing signs of slowing across the majority of the U.K.’ Without question, a veritable explanation for the recent decline is the upcoming General Election, with many buyers holding onto their cash until after May 7th.