National house price growth hides fragmented market

13 February 2018

James Allen, head of Walker Crips Alternative Investments, comments on today’s ONS house price index.

UK average house prices rose by 5.2% in 2017 according to ONS statistics released this morning, with growth in England coming in a shade below the national average at 5%. What, on the face of it, looks like fairly stable growth belies huge variations at the local authority level.

Of the 35 most expensive English local authorities, eight recorded house price falls with the most expensive borough, Kensington & Chelsea, experiencing the biggest drop at 10.7%. For the 35 cheapest local authorities three saw falling house prices over the year,  but the variations were not nearly so marked as they were in the more affluent parts of the country. Given there were only 16 local authorities with declining house prices it is remarkable that almost 70% of these were in the top and bottom deciles.

17 local authorities experienced house price growth that was at least as good as Kensington & Chelsea’s fall was bad. 14 of these are to be found in the middle two quarters of the index by today’s average house price. It is surprising to see 76% of the biggest gains in only 50% of the index. These big risers are spread over many regions so it is not the case, as it has been in recent years, that falls in London simply precipitate rises in the suburbs. A more fragmented market is clearly developing, with differentiation based on market segment and geographic idiosyncrasies. 

There is one surprising correlation however, as only two of these 17 risers voted strongly for ‘remain’ in the EU referendum whereas 9 returned a vote in excess of 56% for ‘leave’. Perhaps residents in these areas are excited at the prospect of exiting the EU and that confidence is being reflected in their local housing markets?