ONS house prices index reveals highly localised market

April 06, 2020

houses down a nice suburban street all with relatively high house prices

ONS house prices index reveals highly localised market

Last week, the Office for National Statistics released its house prices index which included 25 years’ worth of data at a local authority across England and Wales for the first time.

The report showed that between January 1995 – when the research was first carried out – and January 2020, house prices in Hackney, London increased by an immense 833 per cent. At the opposite end of the scale, prices in Hartlepool, County Durham climbed by just 153 per cent.

The ONS data shows that in the last quarter of a century, what was once a £19,483 gap in the average house price between these two local authorities has grown to £465,779, a 24-fold increase.

In London, wealth generation has skyrocketed and demand for housing has consistently outstripped supply. These factors have contributed to London’s average house price rise of £402,152 in the past 25 years, 4.8 times the £84,515 increase seen in the North East where the regional economy has faced deeper challenges and supply and demand have been much less at odds.

However, the financial differences are also due to local market dynamics. Hackney has been at the epicentre of the rise in East London for over a quarter of a century: another reason why the area is so far ahead of its nearest rival.

Although many are uncertain about what effects COVID-19 might have on the UK housing market, it seems the pandemic will not impact the sector in the same drastic way as it has others.

Non-profit think tank 2° Investing Initiative (2ii) recently published a discussion paper called Stress-Testing Covid-19, which provides a simulation of potential losses on banks’ and insurers’ balance sheets under six different scenarios over the next 36 months.

Jakob Thomä, managing director of 2ii and author of the report, explained that the model has shown that “not all negative GDP shocks actually pass through into real estate prices”.

“Traditionally, real estate and house prices shocks have been relatively limited in the context of health pandemics,” he continued, this is because real estate is less sensitive to lower or negative population growth.


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