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