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SmartNewHomes.com House Price index

Amanda Jarvis

February 14, 2006

Highlights

– Prices looking positive
The average selling price of a new home in the UK in January 2006 was £256,055, down 2.4% annually but up 0.1% since the previous month and 0.3% over the last three months. The average demand price (the price homebuyers indicate they are willing to pay for a new home) has risen
annually for the first time since last summer, indicating improving consumer confidence.

Homebuyers from central regions heading north and south
Scotland, the South East and the South West were the most popular regions for new homebuyers last month, completing a turnaround in fortunes for the South East which was seeing an exodus of homebuyers up until a year ago. The East and West Midlands and London are the current unpopular regions.

– Apartments hit new high
The proportion of apartments for sale
in the UK reached a new high last month of 56.9%, compared to 27.8% for detached homes.

The average price of a new home in the UK in January 2006 was £256,055, which is down 2.4% since the same time last year completing ten consecutive months of annual decreases.

However despite annual decreases, the market has started to show signs of rejuvenation over the shorter term, with prices up 0.1% from the previous month (December 2005) and up 0.3% over the last quarter.

SmartNewHomes.com also records how much homebuyers indicate they are willing to pay for a new home [see graph 3]. This measure has increased substantially (3.1%) over the last three months and is up 1.4% on the same time last year – the first annual rise since August 2005 – indicating that consumers’ confidence in the housing market is increasing.

Taking all of these indicators together, the evidence would appear to suggest that 2006 will be a year of sustained positive price inflation for the UK new homes market.

The regions of East Anglia and Greater London had the best start to 2006 with prices increasing in comparison to the last month, quarter and year. The West Midlands and Scotland also saw strong growth over the last year but stabilising over the last month.

Average new home prices in the East Midlands, South East and Yorkshire and Humberside have all declined over recent months despite after each of these regions experiencing stronger growth over recent years.

Scotland remains the most popular destination for new homebuyers in the UK, with 4% more people looking to move into the area than live there. The South West and South East are also popular; a turnaround in fortunes for the South East which was seeing an exodus of homebuyers up until a year ago. London, once the most unpopular region with the biggest discrepancy between homebuyers moving in and moving out, has also seen a change in fortunes and now, although still recording a negative migration rate, its unpopularity is surpassed by that of the both the East and West Midlands.

New apartments remained the dominant property type in the UK last month, making up 56.9% of all new homes, a new high. Consequently, the proportion of detached homes dropped slightly to 27.8%.

Apartments have now dominated the new homes market for over two years and the trend, a direct result of government restrictions on planning and housing density, shows no signs of abating in the near future. As a result, the surplus of smaller units skews the balance of supply and demand in the market place and subsequently average prices.

Whilst all property types have seen a decrease in average prices over the last year, semi-detached houses and apartments have started to see a slight turnaround in inflation levels over both the last quarter and last month.


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