The housing market has typically been seasonal in nature, with prices increasing in the summer months and decreasing in the winter. This has traditionally been driven by the laws of supply and demand, where in summer there has been a greater number of people looking to buy and fewer of the same during the winter. When one looks at house prices this year we are beginning to see a similar trend developing.
According to the latest findings by the Nationwide House Price Index, house prices fell by 0.7% in October from the previous month. This forms part of a wider trend where the three-month rate of decline is starting to accelerate to 1.5%. This means that the average house price now stands at around £164k compared to almost £167k in the previous month.
Upon closer investigation it seems that some regions are more impacted than others in Q3. For instance, Scotland has seen the largest declines in the country in Q3 with a quarterly change in the region of -3.4%. This has left YOY house prices down in this region by 0.6% when you compare prices with Q3 2009. Interestingly, Northern Ireland has taken a significant leap in Q3 where house prices grew at around 1.6% however overall in 2010 they are the worst performing region with house prices having fallen around 11%.
London, perhaps unsurprisingly, has had the best annual growth of any region in the country where house prices have increased by around 9% in 2010. London’s Q3 performance was one of the best in the country as house prices grew at around 0.4%. What is particularly interesting about London is the fact that the average house price is around £294k, representing an over £100k difference between the national average. One argument for this is that house prices in London are boosted both by wealthy financiers and foreign investors looking to buy in the capital. To this end, one has to wonder; is London in a real estate bubble compared to the rest of the UK?