Downloads

The links to Excel files containing the exuberance indicators and the forecasting results are available for download in this section.

2017

Q1 2017

Exuberance Indicators          Forecasting  

Overview: The growth in UK property prices continues, and at a higher rate than in the previous quarter (1.1% in 2017Q1 compared to 0.7% in 2016Q4). Since the previous release of the Observatory, house prices have increased in all UK regions with the exception of the property markets of the North, Wales and East Anglia. Areas with the highest property price inflation rates are Greater London(2.4%), South West (2.3%) and West Midlands (2.2%), while the North and Wales are the two regional markets which recorded the largest fall in the house prices over the period, by 0.8% and 0.4% respectively. Interestingly, the housing market of East Anglia, which had recorded the highest property price inflation for the past two consecutive periods, has now experienced a 0.2% decline in property prices. This decline was the first time since 2012Q3.

With regards to the exuberance indicators, despite the overall growth in house prices, the reported statistics show no signs of exuberance at the national level.

The results of our forecast exercise suggest that UK house prices will continue to grow this year mainly due to (i) the restricted supply of new houses, and (ii) the fall in the real mortgage rate. However, house price growth is predicted to be smaller compared to 2016 (2.5% vs 4%) mostly because of negative market expectations regarding future interest rate dynamics and the slowdown in the growth rate of the consumption expenditure.

With regard to the regional housing markets, the predicted patterns of property price behavior vary considerably. According to the forecasting results, housing inflation in London and in the regions contiguous to it, Outer South East and South West, will continue to rise in the course of 2017.  In particular, the forecasts indicate a considerable 5.7% growth in London property prices over the year. On the other hand, the forecasts predict a negative growth in the property prices of Northern Ireland, the North, Wales and Yorkshire & Humberside.

This quarter’s one-year-ahead forecasts present a scenario where the South will continue to experience sustained house price growth while the rest of the country will experience a stagnated or declining property market. The results in the next quarter will be important to see if this split in the housing market ‒South/rest of the UK, is confirmed.

2016

Q4 2016‌

Exuberance Indicators          Forecasting

Overview: The growth in UK property prices continues but at an even lower rate than previous quarters. The reported statistics are still showing no indication of exuberance at the national level. The recent slowdown in property price inflation in London and metropolitan areas affected the corresponding exuberance indicators that are now farther away from the explosive threshold. This follows from the introduction of tax changes and incentives to buy-to-let properties earlier in the year, and the result of the EU referendum in the UK in June (Brexit).

Since the previous release of the Observatory, house prices have increased in all regions with the exception of Northern Ireland, where property prices have actually declined by 0.2% for the first time since 2016Q1.We note that the rates of house price inflation vary quite considerably across regional markets. While the growth of London property prices has slowed down even further relative to the previous quarter (the value of the statistic is now around 0.3%), property price inflation in regions contiguous to it (Outer South East and East Anglia) has started to build up. The rate of house price growth in East Anglia, for instance, has been the highest among the regions of the country for the last two consecutive periods.

Overall, regions that have recorded the highest property price inflation rates are East Anglia (3%), Outer South East (1.3%) and Wales (1.2%), while Scotland and London are the areas with the lowest house price growth over the period: 0.2% and 0.3% respectively.

The results of our forecasts suggest that house prices in the national and all regional property markets will grow this year. For the UK national market, the considered forecasting models predict a slowdown in the rate of house price inflation to 3.5% in 2017 (we note that the value of the corresponding statistic in 2016 was 4.4%). Although house prices are expected to grow at a lower rate than last year, the two main factors responsible for the positive forecasted growth in the housing market are (i) the sound domestic economic conditions (mainly a healthy growth rate of consumption), and (ii) the fall in the real mortgage rate (mainly due to the recent rise in inflation rate).

When it comes to the regional housing markets, the predicted patterns of property price behaviour vary across regions. We note that expectation about the future interest rate increases, which is an important determinant of husing dynamics in London but not in the other regional markets, puts a downward pressure on the house price growth in this region. According to the forecasting results, housing inflation in London will slow down in the first quarters of 2017, but the growth in property prices is predicted to build up towards the end of the year. Overall, the forecasts indicate a 3.9% growth in London property prices in the course of 2017. The forecasts predict a similar pattern of house price behaviour in the regions contiguous to London, including Outer Metropolitan, Outer South East and South West. We note that the property market of East Anglia, which is currently growing faster than any other regional market of the country, is predicted to slow down in 2017, but still remain the market with the highest housing inflation (the forecasts suggest that house prices in this region will grow by 5.7% over the year).

 

Q3 2016

Exuberance Indicators

Overview: UK property prices continue to grow, but at a lower rate than previous quarters, showing no sign of exuberance at the national level. The recent slowdown in property price inflation in London and metropolitan areas affected the corresponding exuberance indicators that are now farther away from the explosive threshold. This follows from the introduction of tax changes and incentives to buy-to-let properties earlier in the year, and the result of the EU referendum in the UK in June (Brexit).

House prices in all regions have increased since the previous release of the Observatory, however there is a considerable variation in the rates of property price inflation across regional markets. The growth of London house prices has slowed down relative to the previous quarter, to around 1%. We note that property price inflation in regions contiguous to London (Outer Metropolitan and Outer South East) is also slowing down. In Outer Metropolitan, for instance, the rate of house price growth is less than 1%, whereas the value of the statistic in the second quarter of 2016 was around 2%.

Overall, regions that have recorded the highest house price growth rates are East Anglia (1.9%), Scotland (1.4%) and Northern Ireland (1.4%). On the other hand, Wales and West Midlands are the areas with the lowest property price inflation over the period: around 0.2% in both regions. 

Q2 2016

Exuberance Indicators

Overview: UK property prices continue to grow and are currently at historical highs. However, the rate of price growth is slowing down and national-level exuberance indicators are still far from the explosive threshold. There is a considerable variation in the rates of property price inflation across regional markets in the UK. The growth of London house prices is rising again, to 1.4%, after a slowdown recorded in the previous release. On the contrary, house price inflation in regions contiguous to London (Outer Metropolitan, Outer South East and East Anglia) has slowed down relative to the previous quarter. The recent slowdown in property price inflation in London and southern areas affected the corresponding exuberance indicators that are now farther away from the explosive threshold. This follows from the introduction of tax changes and incentives to buy-to-let properties. Overall, house prices have increased in all regional markets but two: Scotland and the North are the only areas where property prices have fallen relative to the previous quarter (by 0.2% and 1% respectively). On the other hand, Northern Ireland, is the region which has recorded the highest house price growth rate (2.7%) since the last release of the Observatory.

The result of the EU referendum is expected to have an (negative) impact on the property market and this will be discussed in future releases of the UK Housing Observatory. The channels through which this may materialise, according to the latest release of the Bank of England’s six monthly Financial Stability Report, are: buy-to-let investors abandoning the market because of lack of confidence, and the slowdown of foreign inflow of money in the market (although this may be particularly acute in commercial property).

Q1 2016

Exuberance Indicators

Overview: While UK property prices are still at historical highs, there are no signs of exuberance at the national level. There is, however, a considerable variation in the rates of house price inflation across regions. The growth of London house prices has slowed down: the figure for the first quarter of 2016 is 1.2%, which is nearly three times lower than that recorded in the last quarter of 2015. This has coincided with two factors, possibly working in opposite directions: an increase in the uncertainty of global economic conditions, especially in the East, and the run-up to the introduction on the 1st of April of extra 3% stamp duty on additional property purchases. The slowdown in London house prices affected the exuberance indicators that are now farther away from the explosive threshold. At the same time, contiguous regions to London have recorded a considerable price increase relative to the previous quarter: Outer Metropolitan (3.1%), Outer South East (2.5%) and East Anglia (4.1%). This is in line with the so-called ripple effect, suggesting that substantial house price increases in London over the last few years spread out to surrounding regions over time and have a leading effect on the UK National Housing market.

 

2015

Q4 2015‌

Exuberance Indicators       

Overview: UK property prices have now reached historical highs, exceeding their peak values of 2007, but there are still no signs of exuberance at the national level. There is, however, variation across regions in the UK. London house prices, which rose by 11.6% in the past year only, are even closer to entering an exuberant phase relative to the previous release of the Observatory. Historical evidence suggests that London is leading the UK National Housing market (the so-called ripple effect) and there is therefore a risk of exuberance spreading to surrounding regions, and from there to the rest of the UK. Such concerns are supported by the indicators of the London Outer Metropolitan area, which have been increasing over the past year. If real house prices in London continue growing at 2.9% per quarter, they will enter into an exuberant (or bubble-type behaviour) phase in three quarters, before the end of 2016.

Q3 2015‌

Exuberance Indicators

Overview: Although UK property prices are currently at historical highs, exceeding their peak values of 2007, there are no signs of exuberance at the national level.  London house prices, on the other hand, which rose by 11% in the past year only, are very close to entering an exuberant phase. Historical evidence suggests that London is leading the UK National Housing market (the so-called ripple effect) and there is therefore a risk of exuberance spreading to surrounding regions, and from there to the rest of the UK. Such concerns are supported by the indicators of the London Outer Metropolitan area, which have been increasing over the past year. If real house prices in London continue growing at 2.75% per quarter, they will enter into an exuberant (or bubble-type behaviour) phase in six quarters.

Q2 2015

Exuberance Indicators

 

  


All publications that make use of this data must cite:

Alisa Yusupova, Efthymios G. Pavlidis, Ivan Paya and David A. Peel (2015), UK Housing Market Observatory: Exuberance Indicators,  Department of Economics, Lancaster University Management School. Available from: www.lancaster.ac.uk/lums/economics/research/housing/