UK House Price Index: January 2021

24th March 2021

The Office of National Statistics latest house price index was published today.

UK average house prices increased by 7.5% over the year to January 2021, down from 8.0% in December 2020.

Average house prices increased over the year in England to £267,000 (7.5%), in Wales to £179,000 (9.6%), in Scotland to £164,000 (6.9%) and in Northern Ireland to £148,000 (5.3%).

The North West was the English region which saw the highest annual growth in average house prices (12.0%), while the West Midlands saw the lowest (4.7%).

Over the past four years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England. The beginning of 2020 saw a pick-up in annual growth in the housing market before the coronavirus restrictions were put in place at the end of March 2020.

Price variations at the beginning of 2020 may reflect the unusual conditions in the housing market at the time. People were advised not to move house during the tightest restrictions in April and May 2020. As such, property transactions completed during that time may have been more concentrated than usual among those without complicating factors, such as a chain. For example, first-time buyers - typically at the lower end of the price scale - may have been freer to complete transactions than former owner-occupiers, who may have had to co-ordinate multiple sales during lockdown.

Recent price increases may reflect a range of factors including pent-up demand, some possible changes in housing preferences since the pandemic and a response to the changes made to property transaction taxes across the nations.

Pent-up demand may have contributed towards an increase in house prices. The Bank of England's Money and Credit January 2021 release reported that mortgage approvals for house purchases (an indicator of future lending) was 99,000 in January 2021, which is in line with the average of 100,000 since October 2020.

The pandemic may have also caused house buyers to reassess their housing preferences. In our UK HPI data, we have seen the average price of detached properties increase by 8.6% in the year to January 2021, in comparison with flats and maisonettes increasing by 2.6% over the same period.

Changes in the tax paid on housing transactions may have allowed sellers to request higher prices as the buyers' overall costs are reduced. On 8 July 2020, the Chancellor of the Exchequer announced a suspension of the tax paid on property purchases with immediate effect in England and Northern Ireland. The suspension came into effect on 15 July in Scotland and 27 July in Wales. In England and Northern Ireland, properties up to the value of £500,000 would incur no tax, while the thresholds for Scotland and Wales were £250,000. The tax holiday for Scotland is due to end on 31 March 2021. The tax holiday has been extended until 30 June 2021 in Wales. In England and Northern Ireland, the tax holiday has been extended until 30 June 2021 after which the threshold will decrease to £250,000 until 30 September 2021. From 1 October 2021, the Stamp Duty thresholds will revert back to what they were before 8 July 2020.

The average UK house price was £249,000 in January 2021; this is £17,000 higher than in January 2020 (Figure 2).

On a non-seasonally adjusted basis, average house prices in the UK decreased by 0.5% between December 2020 and January 2021, compared with an increase of 0.1% in the same period a year ago.

On a seasonally adjusted basis, average house prices in the UK were unchanged between December 2020 and January 2021, following an increase of 1.0% in the previous month.

House prices by country

House price growth in Wales increased by 9.6% over the year to January 2021, unchanged since December 2020, with the average house price in Wales at £179,000.

The average house price in England increased by 7.5% over the year to January 2021, down from 8.0% in the year to December 2020, with the average house price in England now at £267,000.

The average house price in Scotland increased by 6.9% over the year to January 2021, down from an increase of 8.1% in the year to December 2020, with the average house price in Scotland now at £164,000.

The average house price in Northern Ireland increased by 5.3% over the year to Quarter 4 (Oct to Dec) 2020. Northern Ireland remains the cheapest UK country in which to purchase a property, with the average house price at £148,000 .