House prices have generally increased since the last housing market crash in 2008. However, the latest round of headlines reported this in a consistently bizarre way, stating figures which didn’t support rapid growth combined with headlines stating a housing crisis in the UK!
For example, I noticed this on my google finance feed last week:
“Surged almost 50% since the last election in 2010” and “UK Housing Crisis” are quite sensationalist headlines aren’t they? Let’s examine these statements further.
The Reported “Housing Crisis”
This headline comes from an Evening standard article, which quotes price increases from Rightmove as their source. They don’t, however, give any specifics as to where these figures are shown in the Rightmove reports, indexes, blog or site.
Okay, let’s have a look at the Righmove website to see what we can find. After a bit of looking around, I can find the “House Price Trendometer”. Remember, the figure quoted in the Evening Standard is that “house prices have surged almost 50% or £195,420 since the last election in 2010”.
Therefore, I’ve put May 2010 as my start date but the trendometer only goes up to the end of 2014, so I can’t substantiate their claims here.
Instead, I find some relevant data in the Rightmove House Price Index report.
From the April 2015 report, we can see that the average price in April 2015 in Greater London is £594,585. From the May 2010 report (the date of the last general election), the Greater London average price is £420,203.
I make this a difference of £174,382. If we use April 2010 (because the date of the last election was 6th May 2010), the Greater London average price is £421,822, meaning the difference of £172,763. Either way, it is a long way below the reported amount of £195,420 which is quoted (obviously without a source) in the article.
Using the above figures from April 2010 until April 2015, the actual percentage increase which is quoted as almost 50% is more accurately 40.9% over the five year period. This gives an annual house price increase in Greater London of 7.1% per annum over the period.
This is described by The Evening Standard and The Independent as a “UK housing crisis”. Let’s address two reasons why this is simply bull!
1) 7.1% annual growth is not a housing crisis in the UK
For figures in the long-term, we can turn to the Nationwide House Price Index, which dates back to Q4 1952.
The average house price in Q4 1952 was £1,891. In 2014, it was £189,002. This means that the annual growth between Q4 1952 and Q4 2014 is 7.7% per annum over the past 62 years!
- Average annual price increase in the UK since 1952 = 7.7%
- Annual price increase in London from 2010 to 2015 = 7.1%
Can anyone explain to me why this represents a “crazy market” in Greater London since the last election? Where is this housing crisis?
2) A London housing crisis is not necessarily a housing crisis in the UK
Secondly, as we’ve previously spoken about in detail in the past, a London housing crisis is not the same thing as a UK housing crisis. I know this because when I was about 3 years old, I learned the difference between a country and a city. It seems, however, that the mainstream media have forgotten this distinction!
The same figures for average house prices across the UK, taken from the Nationwide HPI Index, is:
- April 2015 – £286,133
- April 2010 – £235,512
Total change = £50,621 or 21%
Therefore, the annualised change is around 4.0% per year.
Therefore, the “UK housing crisis”, which is used in the context that house prices as increasingly too quickly and people can no longer afford to buy a home, is based on the fact that annual house price growth over the past 5 years is around half of what it usually is!
That doesn’t sound like a housing crisis in the UK to me. One thing I do know about a crisis though is that the word “crisis” certainly gets the readers’ interest and sells advertising space nicely…! Funny that, isn’t it?