Have UK house prices turned the corner?

The average price of a house in the UK rose by 0.8% on the year in November, the fastest pace since April.

UK house prices are showing signs of life. Nationwide data shows that the average price of a home rose 0.8% on the year in November, the fastest pace since April. With inflation running at 1.5% and wage growth at 3.5%, that means that prices are slowly falling in real terms and becoming more affordable. The house price/earnings ratio is currently at about 6.8, below its 2017 peak of 7.3 but still well above the long-term average of 4.5.

The slowdown has been most pronounced in London, says Oliver Shah in The Sunday Times. Property prices in the capital dropped 5% from their 2016 peak before a recent low; sales volumes fell 40%. Yet the "bulls are beginning to paw the ground". A 21.1% jump in the number of buyers in October and a sharp rise in the number of estate agents predicting price growth over the next 12 months suggests that the market may have turned the corner. House prices in the city picked up 1% year-on-year in October.

Yet while British house prices are now moderating compared to incomes, it may take some time for first-time buyers to feel the effect, writes Melissa Lawford in The Daily Telegraph. Housing market trends usually start in the most expensive properties and cities and then gradually trickle down into the wider market as people find themselves priced out, explains Hansen Lu of Capital Economics. Where London leads, the rest of the country often follows.

Recommended

China Evergrande just missed a bond payment. Does it matter?
China stockmarkets

China Evergrande just missed a bond payment. Does it matter?

Troubled Chinese property giant Evergrande has just missed making an interest payment to some of its bondholders. That's not a surprise, says John Ste…
24 Sep 2021
Evergrande: Chinese property giant spooks global markets
China stockmarkets

Evergrande: Chinese property giant spooks global markets

Global markets fell this week as investors worried about the fate of Evergrande, China’s most indebted property developer, which is teetering on the b…
24 Sep 2021
China’s property woes are coming to a head – so what happens now?
China stockmarkets

China’s property woes are coming to a head – so what happens now?

Chinese property giant Evergrande is in big trouble. And with no bailout plan yet, markets are getting nervy. John Stepek looks at how things might go…
20 Sep 2021
Evergrande: China’s epic property bubble hisses air
Chinese economy

Evergrande: China’s epic property bubble hisses air

Evergrande, once the world’s most valuable real-estate group, is now the world's most indebted as China's epic property bubble starts to deflate.
17 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
What really causes inflation? Here’s what prices since 1970 tell us
Inflation

What really causes inflation? Here’s what prices since 1970 tell us

As UK inflation hits 3.2%, Dominic Frisby compares the cost of living 50 years ago with that of today, and explains how debt drives prices higher.
15 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021