THE MONEY STATS – Beginning of the Housing Bubble Burst

Average house prices across the UK fell by 0.7% over the last quarter according to Halifax, and by 0.3% in February according to Nationwide.

According to the latest Money Charity Money Statistics, the latest house price estimates from two of the country’s largest lenders, reveals the lowest rate of increase in house prices in half a decade. Over the year, house prices are predicted to have risen by 1.8% by Halifax and 2.2% by Nationwide.

These annual increases fall well behind the current annual Consumer Price Index at 3%, and even behind average pay increases, averaging at 2.5% with bonuses over the year, and 2.4% without.

This fall suggests what many have been predicting for a number of years – a possible housing bubble burst in the UK. Since April 2016, the average house price has risen by over £17,000 according to the ONS. But over the same period of time, the annual growth in house prices has fallen from 4.9% to the 2.2% reported today by Nationwide.

It is possible that recent changes to the housing market and government policy have caused the recent slump in house price growth. Prime Minister Theresa May’s recent emphasis on building more affordable homes, along with the removal of stamp duty and promise to build 300,000 a year in the Autumn Budget may be steadying the rocketing house prices we have seen in the past 5 years.

Since the house price boom, the average age of a first-time buyer has increased to 30, with the average amount borrowed increasing from 3.39 times the average household income in March 2015, to 3.65.

Michelle Highman, Chief Executive of The Money Charity says:

“We have seen huge increases in the average house price since 2013, making the goal of owning a home for many a distant dream. The latest statistics from Halifax and Nationwide show promising signs of the housing market steadying itself to a more sustainable level of growth. Saving for a first house buy creates good behaviours when it comes to saving, budgeting and planning. Therefore, it is an important part of developing strong financial capability amongst younger generations.”

Other key points from the February Money Statistics:

  • Annual private rental prices fell by 0.3% from November to January 2018
  • The average household spent £3.53 on electricity, water and gas a day
  • 5% reduction in loans approved for house purchase over the year

Get the full picture and many more fascinating facts about money in the UK in our monthly Money Statistics.