House prices in Scotland are growing faster than the rest of the UK, however, Scottish Building Society chief Paul Denton has warned that demand outstrips supply.
House prices in Scotland are growing faster than the rest of the UK with the average property £154,798 – an increase of 3.5% year on year, according to government House Price Index (HPI) figures released today.
The UK average was £235,298, up 2.2% on November 2018 and an increase of 0.4% on the previous month.
The volume of residential sales in Scotland in September 2019 was 8,628, an increase of 1.8% on the original provisional estimate for September 2018. This compares with an increase of 3.3% in England, 1.3% in Wales and 4.9% in Northern Ireland.
The HPI report says: “Prices vary across Scotland, with the highest-priced area to purchase a property being City of Edinburgh, where the average price was £277,600, and the lowest-priced area being East Ayrshire, where the average price was £95,941.”
Paul Denton, chief executive of Scottish Building Society, said: “The figures relate to November, so it is too early to assess the long-term impact of the General Election result on the Scottish market.
“Many commentators predict economic uncertainty to ease in 2020 with a resultant increase in transactions. However, while consumer confidence is important, demand continues to outstrip supply. We would support any initiative to help people on to the property ladder, including accelerating the number of new homes being built.
“Last month, we became one of the first lenders to take applications from the Scottish Government’s First Home Fund . This will make the housing market fairer by providing £150 million until March 2021 to help 6,000 people buy their first home.”
The UK HPI is calculated based on completed sales at the end of the conveyancing process. This means that while the UK HPI may not be as timely in publishing as the other measures, it is however ultimately more complete with coverage of both cash and mortgage transactions for the whole of the UK.
– The average UK property price has risen 43% since 2008, while wages have increased by just 15% over the same period
– If wages had increased at the same rate as house prices over the past 10 years, the average annual UK salary would now be £35,113
– London boroughs and Home Counties play host to the UK’s highest earning homes
– Homeowners have also benefited from falling mortgage rates over this period, as despite property values rising by 43% monthly mortgage payments have increased by just 3%
New analysis from independent mortgage broker Private Finance shows the average UK home has increased in value almost three times faster than its owner’s wages over the past decade.1
The average UK home experienced a 43% rise in value between 2008 and 2018, from £160,954 to £229,861.
In comparison, the average annual UK salary has increased by just 15% from £24,606 to £28,860 over the same period. Had wages experienced the same percentage increase as house prices, the average employee would now be earning £35,187 per year.
London boroughs and Home Counties home to highest earning properties
Homeowners in London boroughs and the Home Counties have witnessed their homes outperform them to the greatest extent.
The average property price in Kensington and Chelsea has soared by 85% over the ten-year period, while wages have increased by just 3%.
Had homeowners in Kensington and Chelsea seen their wages increase to the same extent as the value of their homes then the average salary in the borough would now be £112,124.
Table 1: Top 10 hardest working regions for house prices
Growth in wages 2008-2018 (%)
Growth in house prices 2008-2018 (%)
2018 annual wages
Average earnings if wage growth matched house price growth
Kensington and Chelsea
City of Westminster
Hammersmith and Fulham
Richmond upon Thames
Property values rise as mortgage costs fall
Not only have homeowners benefited from rising property values over this period, but falling mortgage rates mean that the monthly cost of owning a home has become considerably more affordable – making their return on investment even more lucrative.
From 2008 to 2018, the average two-year fixed rate mortgage at 75% loan-to-value (LTV) has fallen from 4.77% to 1.73%. While house prices have increased, the average UK homeowner who purchased at the end of 2018 would only be paying £18 (3%) more per month on their monthly mortgage payments thanks to falling mortgage rates, this is despite the average loan size increasing by 43%.2
Graph 1: Bank of England average 2 year (75% LTV) fixed rate mortgage rate
Table 2: Monthly repayments for average UK homeowner3
Interest rate (2 year fixed 75% LTV)
Monthly mortgage payments
Simon Checkley, Managing Director at Private Finance comments:
“Property first and foremost provides a roof over your head and a place to call home; however, over the long term it can act as a lucrative investment. With falling mortgage rates making the cost of owning a home even more affordable, homeowners’ potential return on investment could be set to become even greater.
“Many homeowners will undoubtedly take comfort in the fact that over the past 10 years, as they’ve worked hard to earn an income, their home has essentially been doing the same – and arguably even more successfully. Though house price growth has slowed in recent years, it remains buoyant in many areas of the country, and has historically remained strong over the long-term.
“This money needn’t remain locked away in our homes. For homeowners looking to stay put, or move to a more manageable house, downsizing and remortgaging are both options that can enable individuals to release some of the money earnt by their home to help them with their wider financial goals.”
1 Analysis based on ONS Price Data (December 2008 and December 2018) and ONS gross mean weekly earnings data (2008 and 2018) for local authorities across the UK. Local authorities only considered where full sets of both data are available.
2 Bank of England quoted household rates data, 2 year fixed rate 75% LTV (MONTH/YEAR).
3 2008 repayment calculation: Based on assumption of average UK house price in 2008 (£160,954). Average loan size (75% LTV) = £120,716. Mortgage term of 25 years.
2018 repayment calculation: Based on assumption of average UK house price in 2018 (£229,861). Average loan size (75% LTV) = £172,396. Mortgage term of 25 years.
The UK property market has peaked, and average prices are falling according to a property management firm.
Apropos by DJ Alexander Ltd has analysed official data and found that average prices in all parts of the UK (with the exception of Wales which continues to increase in average price) peaked between August and November of last year with average prices in London having reached their highest even earlier in July 2017.
All average property prices across the UK, England and Scotland peaked in August 2018 at £232,194, £152,411 and £249,127 respectively whilst in Wales the December 2018 average prices continued to rise reaching £161,845.
London prices reached their peak of £488,527 in July 2017 and have been below that level ever since and, in the latest month for data are 3.0 per cent below the peak.
The value of gross mortgage advances has grown to £73.5bn which is the highest level since Q4 2007. Of further concern is that the proportion of high loan-to-income (LTI) lending (loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers) has increased 1.7 per cent to 47 per cent with the share of loans with a loan to value (LTV) exceeding 90 per cent also increasing to 4.3 per cent.
The value of outstanding mortgages balances with some arrears increased for the first time since Q2 2016 in the fourth quarter of last year although still only accounts for one per cent of all balances.
David Alexander, joint managing director of Apropos by DJ Alexander Ltd, said: “Whilst there are concerns that the property market has stalled and is now falling back in most parts of the UK this is due to a number of factors rather than the enormous overheating of the market which occurred in 2007.
“London is undoubtedly suffering from a market which grew incredibly quickly and is now stabilising at a lower level. This will be because of individuals and investor worries over Brexit and continued economic uncertainty. The latest statement from the Chancellor that growth in the UK this year is slowing to its lowest level since 2012 will have done little to reassure the property markets.
“There is little doubt that the buy-to-let market has fallen back as smaller, more independent investors exit the market due to the enormous financial and regulatory changes which have occurred in the last couple of years. This will be taking some heat out of the market at a time when individual buyers may already be holding from commitment due to external factors.”
He added: “Although the value of debt is now at its highest level since Q4 2007 and high LTI lending is once again becoming a feature of the marketplace there is little sign of the same frenetic atmosphere which accompanied the 2007 property crash.”
Mr Alexander concluded: “Despite some of the gloom currently present within the market there are opportunities, there are possibilities for individuals and investors. It requires greater skill, a long-term attitude to the property market, and some courage to understand that property prices will always ebb and flow, but the overall direction is up.
“You need to take a medium to long term view to get the best out of a home or an investment. Short termism may sometimes win but as a rule it is a tactic which is likely to fail.”