The ONS House Price Index data shows the first annual house price falls since April 2012. House price falls are beginning to are visible across the overall market, particularly in specific regions. The observed declines in certain areas suggest that the impact of falling house prices has become more pronounced in recent months.
Regional disparities underscore the nuanced nature of the slowdown. While some regions, like Glasgow and Midlothian, are yet to experience falling house prices over a 12 month period. However, the data highlights substantial declines in other areas, which are pulling down the overall average. Regions will annual falls will be the areas experiencing the sharpest declines. These descending trends may signify a broader shift in the market, potentially reflecting more significant decreases in the preceding months.
In the context of a slowing housing market, the data implies that the effects of falling house prices are now permeating specific regions, and the extent of these declines may have intensified over the recent months. This nuanced perspective underscores the importance of temporal considerations when assessing the dynamics of the housing market, emphasizing that recent falls may be indicative of a broader trend impacting the overall market performance.
Disclaimer: This is not financial advice and you are responsible for your own financial decisions. I am not a mortgage broker or advisor and I don’t give financial advice! Please consult professional advice before making any kind of mortgage decision.
UK House Price Index: September 2023
The Office for National Statistics (ONS) rolling 12-month index calculates monthly house price inflation in the UK. This is calculated using data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland. This ONS house price index reports on the year on year trend in house prices. Due to the way this index is calculated it provides a relatively stable view of the average house price. However, this comes at the expense of a serious time lag effect.
The UK House Price Index report for September 2023 reveals that the average house prices in the UK decreased by 0.1% in the 12 months leading to September. The provisional estimate for the average UK house price in September 2023 was £291,000. England and Wales experienced a decrease in average house prices, while Scotland saw an increase of 2.5%. Northern Ireland registered a 2.1% increase, with an average house price of £180,000.
The North East had the highest annual house price inflation at 1.6%, while the South West had the lowest at -1.6%. London retained the highest average house prices but with a negative annual inflation rate of 1.1%. The report emphasizes that estimates are provisional and subject to revision due to recent challenges in transaction volumes.
Read: 5 Reasons House Prices Will Keep Falling In The UK
ONS Rolling 12-Month Annual House Price Change Map
Using data from the ONS 12 month house price index, I’ve mapped the annual house price changes down to local authority level. The HM Land Registry data mapping highlights that in general house prices are falling. However, in some areas this is taking more time to feed into the market. This map will highlight the most pronounced annual house price falls.
In Scotland, Glasgow has experienced a 4.3% increase, while areas like Orkney Islands and Shetland Islands have seen substantial declines of -8.4% and -7.9%, respectively. In Northern Ireland, Derry City and Strabane have witnessed a notable increase of 5.8%, while Lisburn and Castlereagh have remained relatively stable with a 1% change. The London housing market exhibits significant variations, with Kensington and Chelsea facing a substantial decline of -20.6%, while Tower Hamlets sees a notable increase of 6.4%.
Moving to the Midlands, Manchester stands out with a significant 4.8% increase, while Birmingham experiences a more modest 1.3% growth. In the Midlands region, Knowsley and South Tyneside have notable increases of 2.9% and 9.8%, respectively. Conversely, areas like Kingston upon Hull and City of London have faced declines of -1.8% and -15.7%. The housing market in the South East and South West of England displays a diverse landscape, with areas like Test Valley experiencing a substantial 8.6% increase, while areas like Isle of Wight and Cornwall have seen declines of -1.1% and –1.7%, respectively. Overall, the data reflects a mixed picture of the housing market across different regions and local authorities, with varying degrees of growth and decline.
ONS House Price Index: Key Insights By Region
Scotland:
- Glasgow experienced a 4.3% increase in house prices.
- Orkney Islands and Shetland Islands faced substantial declines of -8.4% and -7.9%, respectively.
- East Lothian saw a significant increase of 15.2%.
Northern Ireland:
- Derry City and Strabane witnessed a substantial increase of 5.8%.
- Lisburn and Castlereagh remained relatively stable with a 1% change.
- Blaenau Gwent experienced a notable decline of -11.2%.
London:
- Tower Hamlets stood out with a notable 6.4% increase.
- Kensington and Chelsea faced a staggering decline of -20.6%.
- Camden experienced a significant decrease of -5.8%.
Midlands:
- Manchester demonstrated a substantial increase of 4.8%.
- Wolverhampton experienced a decline of -2.1%.
- Gateshead saw a notable increase of 3.9%.
East and West:
- Cambridge saw a decline of -0.6%.
- West Lancashire demonstrated a substantial increase of 6.9%.
- Amber Valley experienced a modest decline of -0.1%.
East Midlands:
- Derbyshire Dales showcased a substantial increase of 3.8%.
- Leicester experienced an increase of 2.2%.
- Nottingham witnessed a 1% increase.
West Midlands:
- Birmingham experienced a modest increase of 1.3%.
- Staffordshire Moorlands faced a substantial decline of -6.9%.
- Stratford-on-Avon witnessed a notable decline of -4.9%.
East of England:
- Brentwood saw a decline of -2.2%.
- Uttlesford experienced a decline of -2.6%.
- Test Valley demonstrated a robust increase of 8.6%.
South East and South West:
- Test Valley in the South East showed a robust 8.6% increase.
- Cornwall in the South West faced a decline of -1.7%.
- Isle of Wight experienced a decline of -1.1%.
South West:
- Bath and North East Somerset demonstrated a robust increase of 3.8%.
- Bristol experienced a decline of -2.4%.
- Cornwall faced a decline of -1.7%.
ONS House Price Index: 12-Month Falls By Property Type
The ONS house price index data provides an overall perspective on housing market trends. It also enables a detailed examination of price fluctuations based on different property types. These include detached houses, semi-detached houses, terraced houses, and flats. Let’s delve into the distinctive changes observed in each property type, elucidating the factors contributing to the more pronounced declines in house prices.
Kensington and Chelsea, known for its high-end properties, has witnessed a staggering decline, particularly in detached houses (-21.9%) and semi-detached houses (-21.1%). The market in the City of London has also suffered, with both detached and semi-detached houses experiencing a decrease of -15.7%. Kensington and Chelsea was once described as a “ghost town of the super-rich” and the epi-centre of the ‘buy-to-leave’ phenomenon. Now the housing bubble has popped, the super-rich will no longer see property as a stable store of wealth. This may well be the cause for such significant house price falls.
Moving beyond the affluent areas, Blaenau Gwent in Wales faces challenges across property types, with detached houses (-8.5%), semi-detached houses (-11.2%), terraced houses (-11.7%), and flats (-12.5%) all experiencing notable declines. Burnley, another region on the list, shows a broad decline in house prices across all property types, with semi-detached houses (-10.6%) and flats (-10.9%) taking the biggest hits.
Hastings, Orkney Islands, Shetland Islands, and Blackpool are among the areas witnessing substantial falls in property prices across the board. The impact is felt across detached, semi-detached, terraced, and flat categories. This is most likely due to more local challenges such as affordability, which will be weighting on local markets. Overall, these statistics shed light on the diverse nature of property value fluctuations across different regions and property types in the real estate market.
ONS House Price Index Time Lag Effect
The Office for National Statistics (ONS) rolling 12-month index, like any other moving average or rolling measurement, is susceptible to a time lag effect due to its inherent calculation methodology. To emphasis this point, just in September 2023, raw land registry figures point towards a -12% annual house price drop. Several reasons contribute to this lag:
Data Collection Timeframe: The ONS relies on a comprehensive and accurate dataset, often collected from various sources, to calculate the rolling 12-month index. The compilation and verification of this data take time, introducing a delay before the index accurately reflects the most recent market conditions.
Reporting Delays: The ONS relies on data reported by various entities, such as property transactions, which may not be immediately available. Delays in reporting, particularly in the context of property transactions or changes in the housing market, can result in a lag as the ONS waits for updated and verified information.
Processing Time: Once the relevant data is collected, it undergoes processing, analysis, and quality assurance checks before being incorporated into the index. This procedural aspect introduces additional time, contributing to the lag between the occurrence of market changes and their reflection in the index.
Publication Schedule: The ONS typically adheres to a fixed publication schedule for its economic indicators. This predetermined timeline ensures consistency and comparability across different datasets. However, it can also lead to a time lag, as the index may not be updated or released until a specific point in the future, even if more recent data becomes available.
Smoothed Trends: Rolling averages, including the rolling 12-month index, are designed to smooth out short-term fluctuations in data, providing a more stable trend over time. While this helps in identifying long-term trends, it may also result in a delayed response to sudden changes in the market, as the index reflects the averaged data over the specified period.
Read: The House Market Crash Is Much Worse Than It Seems Right Now
ONS House Price Index: 2007/08 House Price Crash Time-Lag In ONS Reporting
When there was a housing market crash and banking crisis in 2007 and 2008, house price falls were not reported by the ONS until June 2008. With the bottom not being reported until February 2009. In reality, the pit was likely 12 months prior – so June 2007.
Conclusion: House Prices Fall 0.1% Across The United Kingdom
When the ONS house price index is made public, there is an approximate 18-month lag in the reflection of actual house prices. This is because it takes about 6-9 months for all the data on sold houses to show up in the official records. Then, the Office for National Statistics (ONS) crunches the numbers and gives us a report every 12 months. So, by the time we hear about it, there’s roughly an 18-month gap in the info.
Locations where the house price bubble was most inflated, are more likely to show house price falls in the ONS house price index. This may also be locations that have been used as stores of value by the mega-rich, or areas with a high proportion of buy-to-let properties. Therefore, I would take the ONS house price falls to mean that, areas with falling house prices are in severe distress because of higher weighted falls in more recent months.
Areas with house price increase, have likely seen more moderate falls, which are yet to balance out into the ONS house price index. This is because of the time lag effect. This is why Halifax and Nationwide have been reporting house price falls of between -3-5% year on year.
But here’s the catch – these reports aren’t perfect. They can be a bit off, as I’ve mentioned before.
Which is why I extracted the raw house prices sold data for July, August and September 2023, and developed an interactive map of house price falls. This will show you how much house prices are really falling.
