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Levelling up

Perhaps Mr Gove has already delivered a ‘levelling up of house prices for England’ for his new department, without lifting a finger, suggests Kate Faulkner.

Kate Faulkner

Link to Property Prices

While most of the media are focusing housing stories on the last year’s ‘double digit’ house price rises, I think there is a much bigger story to be told – which is also one that is reassuring to those not yet on the ladder.

When you look at house price growth over time – typically since 2005 – house prices on average, across most regions prior to the pandemic were achieving annualised growth of 1-2.6%. With annual inflation during this time growing at around 3%, on average each year, this has meant that house prices in the North, the Midlands and even the South West hadn’t kept pace with inflation.

Pandemic inflation

The impact of the pandemic property price growth shows that most areas are now at least keeping up with inflation, with average growth from 3% to 3.3% each, so even a little bit more. The only region in England to still be struggling is the North East, where despite 15.3% house price growth year on year (source: Land Registry) annual average house price growth since 2005 remains below inflation at 1.9%.

The house price growth we have seen is an international phenomenon.

Much of the growth of house prices has been attributed to the Government’s Stamp Duty holiday and there is no doubt that this has driven some people to want to bring forward their move. However, an interesting report from Knight Frank suggests that the huge growth we’ve seen here has been happening pretty much everywhere across the world.

According to their latest Global House Price Index the, “pandemic-induced housing boom continues with prices rising by 9.2% on average across 55 countries and territories in the year to June 2021.”

And it appears that the world’s developed economies are seeing the greatest house price booms, with the top 10 reporting a 12% YoY rise in the 12 months to June versus key developing markets which only saw a 4.7% rise.

Comparing countries

Top of the charts is Turkey (+29.2%) but the likes of the US (+18.6%) and even Russia (+14.4%) have seen huge boosts to their house prices. There are those that have suffered though, including India and Spain, both registering falls, albeit less than 1%, in the year to June 2021.

So, two interesting insights this month, firstly, all that’s happened really to house prices in the last 12 months is that they have ‘caught up’ with long term house price growth trends, and secondly, the house price growth we’ve seen is an international phenomenon, not one that is specific to the UK, nor necessarily purely due to the Stamp Duty holiday.

The big question is, what will happen next? Hopefully with the next month or so being ‘forecast time’ for the property pundits, we can visit their latest thoughts!

October 29, 2021

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