How can the average home lose £22,000 but house prices officially rise 4.6%? We explain what’s going on

The common home value within the UK has plummeted £22,000 in a month, based on the most recent figures from the Workplace for Nationwide Statistics.

Right this moment, the ONS mentioned that the nation’s official common home value as £268,000 in comparison with the £290,000 determine it reported final month.

Mysteriously, the identical ONS home value report mentioned that home costs are up 4.6 per cent yearly.

So, how can home costs take a nosedive and go up on the identical time? 

Fairly than signifying some of the aggressive property crashes in historical past, the ONS says that is merely all the way down to a re-calculation in the way in which it assesses home costs – and how much property the ‘common residence’ could be.

The ONS explains that it has shiifted its statistics to take note of the altering face of the property market and higher mirror what the so-called common house is. 

This entails a shift away from bigger dearer properties, therefore the nudging down of the worth connected to that common residence.

The re-calculation relies on altering tendencies within the forms of properties being offered between 2015 and 2023.

Over this era gross sales of smaller properties proportionately elevated, based on the ONS. This implies there have been extra gross sales of flats and maisonettes than of indifferent homes.

It additionally says that gross sales in dearer components of the Britain proportionately decreased. For instance, there have been was a larger proportion of gross sales in Scotland than in London.

Which means the typical UK property offered in 2023 tends to be smaller, and in a less expensive a part of the UK, than the ‘common’ UK property offered in 2015.

By updating the reference interval from January 2015 to January 2023 this has lowered the load of huge, costly property costs making up the general common and has led to a 7.9 per cent drop in common values.

Kris Jenkins of the ONS mentioned: ‘We had initially proposed to replace this reference each 5 years. 

‘Nevertheless, this might have meant utilizing a reference interval in 2020, when the UK housing market was impacted by the COVID-19 pandemic, and led to modifications in housing preferences. 

‘Transactions throughout this time had been atypical in comparison with standard tendencies. We took the choice to delay this replace till the housing market returned to extra regular occasions.

‘This re-referencing ensures the typical value ranges higher mirror the forms of properties at the moment being offered.

‘As our home value index approaches 10 years of manufacturing, we’ll proceed to evaluate the information sources and strategies used to make sure we’re precisely capturing the evolution of the housing market within the UK.’

So what does the ONS say is definitely occurring? 

Based mostly on the up to date calculations, home costs rose by £12,000 on common in 2024, based on the most recent report from the Workplace for Nationwide Statistics.

The common residence in Britain was value £268,000 as of December 2024, primarily based on ONS estimates, which it says is 4.6 per cent increased than the earlier 12 months.

Jeremy Leaf, north London property agent and a former Rics residential chairman, mentioned: ‘This survey is probably the most complete of all of the market house-price indices, overlaying not simply mortgaged properties however the 40 per cent or so of transactions that are organized with out finance.

‘It could be slightly dated however exhibits that the housing market was significantly resilient on the finish of final 12 months. That is regardless of patrons and sellers coming to phrases with the market realities of slower-than-previously-expected falls in borrowing prices.

‘Wanting ahead, we’re not seeing or prone to see any nice modifications in pricing or renegotiation however with inflation edging upwards, the additional price cuts which might vastly help exercise and purchaser and vendor confidence could also be delayed for now.’

Throughout Britain it’s truthful to say costs are transferring sooner in some areas than others. 

The common home value for Northern Eire was £183,000 within the closing three months of 2024, up 9 per cent year-on-year. 

Over the course of final 12 months, in England, common home costs elevated to £291,000, up 4.3 per cent, in Wales costs rose by 3 per cent to £208,000, and in Scotland costs rose by 6.9 per cent to £189,000. 

Inside England there are some huge regional variations as properly. The common residence within the North East rose in worth by 6.7 per cent whereas costs in Yorkshire and The Humber rose by 5.9 per cent final 12 months.

On the different finish of the spectrum, the typical value in London has not modified over the previous 12 months whereas costs within the South West have elevated by 3.8 per cent.

Jonathan Hopper, chief government of shopping for agent Garrington Property Finders mentioned: ‘Not because the heady post-lockdown ‘race for house’ has the divergence between London costs and the remainder of the UK been so stark.

‘Common property costs within the capital ended 2024 precisely the place they started the 12 months. Zero development over the 12 months as an entire, and we even noticed London costs fall in November and December.

‘That is partly a whiplash impact from the tax rises introduced within the Chancellor’s October Finances, which hit sentiment onerous on the prime finish of the market. 

‘Consumers within the capital have since change into extremely price-sensitive, and prepared to barter onerous on value or just look elsewhere.’

Whereas London costs are languishing Hopper notes that the brisk tempo of value rises throughout Northern England continues to widen the North-South divide.

‘On the different finish of the dimensions, the market dynamics in Scotland and Northern Eire are seemingly indifferent from financial gravity,’ added Hopper.

Jonathan Hopper, chief government of shopping for brokers Garrington Property Finders

‘Two components underpin their speedy value development – hovering lease will increase have nudged many tenants into shopping for their first residence, and the comparatively sturdy worth provided in each nations in comparison with different components of the UK has lured price-conscious patrons from elsewhere.

The property market is broadly in good well being, based on Hopper who operates as a shopping for agent and subsequently has no vested curiosity in home costs going up.

Nevertheless, he believes that patrons typically nonetheless maintain all of the playing cards on the negotiation desk.

‘The variety of houses on the market is so considerable in some areas – even in extremely sought-after, prime postcodes – that patrons discover themselves firmly within the driving seat and capable of drive a tough discount on value,’ mentioned Hopper.

‘That is prone to maintain future value rises modest in a lot of southern England, and anybody planning to place their residence available on the market there within the coming months might want to value it competitively to draw patrons.’