Average house prices in Britain finished 2011 at £221,331, down a modest £854 (0.23%) from the same time one year ago, according to property valuation website Zoopla.co.uk.

Scotland, where average property values now stand at £164,844, outperformed the rest of Britain in 2011, recording an average increase of 6.73%. Average home values fell across England by 0.75% (£1,719) and finished the year at £228,926, whilst the average property in Wales is now worth £153,826, down £172 (0.11%) on one year ago.

In England, property values have risen over the past 12 months in London the South East whilst falling substantially in the North. The average home in London is now worth £416,890 up £9,283 (2.28%) on one year ago. The North East was the worst performing region over the past year with average house prices falling £9,596 (5.77%) to £156,659. (See Table 1)

Wigan tops the list of best performing cities over the last year, with property values having climbed 5.62% (£7,057). In contrast, homeowners in Newcastle saw an average decline in property prices of 5.5% (£9,650) over 2011. (See Tables 2 and 3)

Nicholas Leeming of Zoopla.co.uk commented: “National statistics on the housing market can mask differing fortunes in different parts of the country. Londoners continue to see the market go from strength to strength with high demand for a limited number of properties boosting house prices. However, for areas such as the North East where the local economy has suffered more than most, it’s a different story. 2012 does not show much sign of being markedly different to 2011, however, if the overall economy starts to show signs of strength this will filter quickly through to the property market.”

Moderate house price growth expected in 2012, with wider regional and local variations

·National house price growth of 3% forecast in 2012

·Regional and local variations set to deepen, with unemployment being the key factor

·New housing supply will remain historically low

·Rents will continue upwards path, increasing by approximately 5% annually

·Mortgage market will remain limited as a result of Eurozone turmoil

Stuart Law, Chief Executive of Assetz, examines the outlook for the UK housing market:

“The property market in 2012 is likely to continue in a similar vein as it has both this year and last, with relatively flat house prices buoyed overall by a strong performance in key locations, particularly London and upmarket commuter hotspots in the south east. I expect national house prices to end this year just into positive territory at around 2% versus our original 5% forecast, as a result of the faster than expected public sector job losses and the Eurozone crisis. We expect that this will be followed by an increase in values of around 3% in 2012, with many parts of the country seeing no growth or marginal price falls.

“The quantitative easing programme announced in October will introduce further liquidity to the markets as we head into next year and support real asset prices over the short to medium term. However, it is too soon to see the effect of the Eurozone crisis which will continue to impact the markets, limit the amount UK banks are able to lend and, perhaps most importantly, stifle consumer confidence.

“In popular residential areas where there is good infrastructure and a sound employment market, buyer demand will continue to outstrip supply. Areas which are reliant on manufacturing or the public sector, which are struggling with high levels of unemployment, will see very low transaction levels next year and a fall in values of as much as 5%.

“Interest rates are likely to remain low over the medium term, keeping tracker mortgages an attractive option for homeowners.

“We will hopefully see a continued modest improvement in the first time buyer market with a greater number of higher loan to value mortgage products and shared equity schemes becoming available. We are also likely to see a continuation of parents opting to help their children onto the property ladder instead of keeping money in the bank, where they are seeing little return on their savings.

“High levels of activity in the buy to let sector will continue to underpin the market next year, with landlords returning in considerable numbers as well as new investors seeking a safe home for their cash that will also generate a decent income. Our research shows that over three quarters of existing UK property investors are considering buying additional investment properties in 2012. Rents will continue to grow strongly, in the region of +5% next year, as restricted mortgage lending and poor employment prospects has left a whole generation of potential first time buyers with little prospect of buying a home. Consequently landlords are set to benefit from another year of strong yields, albeit alongside only modest capital growth.”

House Price Watch is an analysis of house price data from CLG, LSL Acadametrics, Halifax, Nationwide and Rightmove, giving a comprehensive overview of the UK property market and a more accurate and less volatile picture of house price trends.

July-11 Aug-11 Sep-11
Average house price £199,107 £197,384 £197,531
% monthly change 0.1% -0.9% 0.1%
% annual change -1.4% -1.7% -0.7%

Analysis of data from the leading house price indices shows that UK house prices fell slightly in the third quarter of 2011, but are down only 0.7% in the last 12 months. Graph 1, attached, reveals that the average price in September was £197,531, which is an increase of £2,101 since the start of the year.

Graph 2, attached, reveals the annualised rate of growth for each month’s data and is less volatile than the individual indices themselves. Annualised rate of growth is the change in value that would be registered if the monthly rate of change were maintained for a full year. House Price Watch also regularises this data over three and six month periods, providing a less volatile representation of market trends than individual monthly snapshots.

The annualised average rate of growth for September stands at 0.9% with the three and six month annualised rates of growth showing -2.6% and -0.3% respectively.
Stuart Law, Chief Executive of Assetz, said:
“Several of the indices reported sharp price falls in August which has had the effect of bringing down price growth in the third quarter. Nonetheless, prices are down only 0.7% annually and up 1% since January and we still expect to record positive growth for 2011. However, there is a possibility that prices could fall back further given that we are seeing a very stable market overall with small changes both up and down. Our previous prediction of 5% growth this year is no longer tenable given the limited progress made in the first three quarters, due to the impact of the Government’s austerity measures and the ongoing Euro-zone crisis. Unemployment, however, has not impacted on growth to the extent that was expected by many commentators as it remains at a level well below that forecast.

“The recent decision by the MPC to inject £75 billion into the economy and the Bank of England’s belief that inflation will fall back over the medium term, minimising the risk of interest rate rises, is good news for property buyers and investors. Savers who are staring into the abyss in terms of returns from bank accounts are increasingly likely to turn to more stable investments, such as buy to let, which is generating a solid cash flow for investors as rents continue to rise to record levels. This continued flight of capital into bricks and mortar will underpin long term house price growth with prices expected to remain flat in 2012.

“We continue to see huge numbers of income-starved investors entering the UK buy-to-let market for the first time, attracted by its stability and surety of income.”

- 59% of UK homeowners expect house prices to rise over next 6 months
- Homeowners predict 2.7% gain in their area but 3.3% gain for their home
- Confidence among homeowners in the capital falls for first time in 2011

Confidence in the UK housing market is slightly up on last quarter with three fifths (59%) of UK homeowners expecting house prices to rise over the next six months, despite current economic uncertainty.

According to the latest Zoopla.co.uk Housing Market Sentiment Survey, the proportion of homeowners expecting prices to rise is up from 57% three months ago. However, confidence remains well below the levels of late 2009 and early 2010 when 80% of homeowners expected house prices to rise.

And the phrase ‘An Englishman’s home is his castle’ has never been truer with owners expecting their own properties to outperform those around them. When asked what would happen to the value of properties in their area, homeowners predicted a 2.7% rise on average over the next six months. But when considering their own home, owners expected prices to grow 3.3% on average. This attitude was reflected in the proportion of homeowners who expect prices to fall over the next six months. 26% felt prices would fall in their area while only 22% thought the value of their own home would fall.

Confidence in the housing market rose or remained the same as last quarter in all regions of the country except two, London and the East Midlands. Not only are homeowners in the capital now less bullish about house prices rising over the next six months but those that do predict rises have also significantly cut their expectations from 6.2% growth three months ago to only 3.6% now.

The largest rise in confidence over the last 3 months has been in Northern Ireland where 54% of homeowners now expect house prices to rise over the next six months, up from 41% three months ago. In England 59% of owners expect house prices to rise, marginally up from 58% three months ago and in Wales 57% expect prices to climb, up from 53%. Confidence in Scotland remains unchanged on last quarter with 58% expecting prices to rise.

Nicholas Leeming of Zoopla.co.uk, commented: “This marginal rise in confidence comes amid encouraging news from the lending market which has reported strong lending growth at the end of summer. However, lending conditions remain difficult and as a result we’ve not seen the same level of confidence as early last year when prices were clawing back the ground lost over the recession. Whilst surprising to see confidence fall in London, this is likely due to Londoners feeling prices will now stabilise, following very strong growth over the last twelve months.”