Jan

A lost decade for house price growth, but affordability lags further behind…

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House Prices:

The 2010s decade has
seen the weakest house price growth since 1990s. Figures from
Savills, shared exclusively with The Times, and the
Nationwide’s research show that average house prices across Great
Britain have risen by 34 per cent over the past decade.

But this compares to
an affordability decline as average wages rose by just 20 per cent
over the same period.

Also, when adjusted for inflation over that period, the figures for average house prices would indicate a slight fall of 0.3 per cent, and affordability an even bigger one.

“There has been
practically no real house price growth across the country as a
whole,” Lucian Cook, head of research at Savills, who analysed
average house prices from Nationwide between 2009 and 2019, told
The Times.

“That is
reflective of the fact that parts of the country have been left
behind until very recently. A lot of those lower-value markets in the
north of England are only returning to house price growth very late
in the day,” he said.

In a nutshell:

• House prices up
33% in 10s vs 180% in 80s

• London top
performer in 2010s with house prices rising twice as fast as UK
average

• Low interest
rates have helped support affordability through the decade

• High house price to earnings ratio make deposit a major barrier for first time buyers.

Forty Years of House Price Growth (source Nationwide)

Andrew Harvey,
Nationwide’s Senior Economist, has said:

“We’ve looked at
how the last 10 years compares with previous decades across a variety
of housing metrics. The 2010s has been the weakest decade for house
price growth since the 1990s; nevertheless, prices still rose by 33%
over the decade, somewhat above the 20% rise in average incomes over
the same period.

“Despite recent
weakness, London has been the top performing region over the last
decade, with house prices rising twice as fast as the UK average (at
66%). The neighbouring Outer Metropolitan region (which includes
places such as Slough, Guildford, Crawley and Chelmsford) also
significantly outperformed, with prices rising 54% during the 2010s.

“The northern regions, in particular the North, Yorkshire & Humberside and North West, saw relatively weak house price growth over the decade, with prices slow to recover following the financial crisis. House price growth has remained subdued in Scotland, with just an 8% rise over the past 10 years. Northern Ireland saw the lowest growth, with prices up 2% compared with the end of 2009.”

Growth Across the Regions in the 2010s (source Nationwide)

As the Nationwide charts show, price rises have been very mixed across the regions. Mr Harvey says:

“House price
growth has continued to exceed earnings growth, resulting in a
further rise in the house price earnings ratio. At the end of 2019,
the UK First Time Buyer (FTB) house price to earnings ratio stood at
5, close to 2007’s record high of 5.4, and up from 4.4 at the end
of 2009.

“The last decade
has also seen a significant widening in the gap between the least
affordable and most affordable regions. London been the least
affordable region for most of the past 40 years, but its house price
earnings ratio (HPER) has reached new highs in recent years, reaching
10.2 in 2016, from 6.1 at the start of the decade, with only a modest
improvement to 8.8 at the end of 2019.

“The region with
the lowest house price to earnings ratio in 2019 was Scotland with a
HPER of 3.2 – a decade ago it was the North with a HPER of 3.3.”

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