According to the report, house price annual inflation was 8.2% in England, 2.8% in Wales, -0.8% in Scotland and 2.4% in Northern Ireland.
Annual house price increases in England were driven by an annual increase in the South East (11.4%), the East (10.3%) and London (9.7%).
Taking London and the South East out of the equation, the rest of UK saw house prices increasing on average by 5.0% in the same period and when seasonally adjusted, prices climbed by 0.4% between January 2016 and February 2016.
During February, prices paid by first-time buyers were 8.0% higher on average than in February 2015. For owner-occupiers (existing owners), prices increased by 7.4% for the same period.
Ons also reported that the UK average mix-adjusted house price in February 2016 was £284,000.
Nick Leeming, Chairman at Jackson-Stops & Staff, comments: “Today’s data shows that UK property prices are still on a strong upward trajectory, up 7.6% annually. The South East is leading the way, with an 11.4% price increase and we will continue to see property price rises ripple out from London over the next year as people move from central locations in search of affordable homes.
This all comes as a result of the disconnect between supply and demand, with more properties, particularly genuinely affordable starter homes, needed to fill the void. At the start of this month the latest construction purchasing managers’ index from the Chartered Institute of Procurement & Supply and Markit revealed that the housing sector was the weakest performing in terms of construction output in March. Given the desperate need for new homes in the UK, to see such a statistic now is very concerning.
While London house prices have increased by a further 9.7% annually, there are signs that some areas are seeing slower growth rates. This follows lower levels of demand at the top end of the market, with our central London offices recording on average 2.4 prospective purchasers to every prospective seller in the last year, compared to 3.6 the year before. The lower demand stems from higher transaction and holding costs, such as the revisions to stamp duty, which is adversely affecting both domestic and overseas demand. This means that vendors in the capital who need to sell are reducing asking prices in order to do so. Despite this, the London market is still appreciating and we are seeing record prices being achieved for the best homes, so I would not suggest that it has reached its peak.”
Jonathan Hopper, managing director of the buying agents Garrington Property Finders, comments: “The stars were aligned for this to be a truly barnstorming number. February’s data shows a market running at full steam - when the buy-to-let stamp duty stampede was at a gallop and before any Brexit uncertainty had a chance to cool the upper price brackets.
If ever there was a time for records to be set, this was it. So for February’s headline figure to have come in slightly below the previous month’s level shows how close the market is to peak velocity.
With the ending of the extra impetus provided by investment buyers rushing to complete before April’s hike in stamp duty, price growth could yet have reached its high water mark. London’s extraordinary run of price rises is slowing, and as the capital begins to suffer a flight of equity, it is falling further behind both South East England and East Anglia - where annual rates of price growth still comfortably exceed double digits.
This trend is likely to continue, as the capital’s prime property, so beloved of international buyers, is more susceptible to concerns over the outcome of the Brexit referendum than anywhere else. The impact of the recent tax changes are also likely to be felt more acutely in London. London’s appeal as a safe haven investment destination for the global wealthy remains undimmed, but we are starting to see some buyers hold off their purchases until the Brexit uncertainty is past.
For the rest of the market, any Brexit chilling effect is harder to pin down, and with low interest rates and demand far outstripping supply, prices continue to be driven upwards.
With the exception of Scotland, prices are rising in all parts of the UK. And while there are several clouds on the economic horizon, sustained buyer confidence and a chronic shortage of homes for sale will ensure prices keeping ticking upwards, even if the frothiest rates of growth remain limited to the halo around London.”
Richard Sexton, director of chartered surveyor e.surv comments: “There’s a regional revolution underway. House prices in the East and South East have been hanging on the capital’s coattails for a long time, but not anymore. The South East’s commuter credentials are resulting in higher annual house price growth than in London. People struggling to purchase property in the capital are hunting elsewhere and the South East is the obvious choice – creating a surge in demand.
Across the UK however, the usual suspects are holding back homeownership dreams. A supply shortage is leading to price hikes – which many buyers simply can’t meet. This shouldn’t be the case. Savings have seen a boost from low inflation and rising wages. But unfortunately, housing market prices are generally still moving faster.
More positively, the mortgage product market is at full momentum. Home lending in February reached the second highest monthly total since January 2014. And it’s not just buy-to-let activity benefitting. Lenders are keen to invest in borrowers including first-timers. First-time buyers may be facing higher prices but they aren’t facing fewer mortgage options. The range of choices keeps growing, as well as remortgage options – bringing more choice to potential mortgage hunters.”
Jeremy Leaf, a former RICS chairman and north London estate agent says: ‘The slight decline in the average annual house-price growth figure is not surprising because it reflects the market at or about the turn between growth and stability.
'While the stamp duty hike came in at the start of April, on the ground we saw that the effective cut-off point for ensuring a completion by then was a lot earlier because of how long it can take to buy a property. These figures are already reflecting a change in the market and we expect it to be identified more clearly in subsequent months’ data, reflecting the fact that investors brought forward buying decisions from later in the year.
'Fortunately the market has been underpinned by a healthy number of first-time buyers and second steppers who are keen to take advantage of buying opportunities while competitive mortgage rates hold.'
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "Demand for house purchases remains strong, with the volume of mortgage approvals up by 22 per cent in February. While this will partly have been driven by landlords and second homeowners keen to get a purchase completed before the April stamp duty hike, buyers are generally displaying some confidence in the market.
Cheap mortgage rates, a base rate that doesn’t look as though it is rising anytime soon, and falling unemployment, are giving buyers more confidence to take the plunge, assuming they can find the property they want to buy. Limited supply is likely to be the biggest issue they face in the short term but it may be house price growth which is the bigger issue longer term as it continues to outpace real earnings growth by some margin."
Stephen Smith, Director, Legal & General Housing Partnerships, comments on the ONS House Price Index: “These latest figures show that house prices have continued their unrelenting climb into March, and it’s unlikely that we’ll see a change anytime soon. With the demand for housing continuing to grow, amid a lack of supply, it’s hard to see anything other than more rises to come in the short to medium term.
The UK housing market is paralysed by the mismatch between supply and demand, and unless all parties with a vested interest in solving the crisis make a concerted effort to work together, we will continue to have a dysfunctional market, where the real loser is the consumer.”
