Trend in Property Capital Growth is Still Rising

1 February 2017

Property Capital Growth 2016

The Official Statistic released by the Government in January show that the trend in property capital growth is still rising – up 6.7% on an annual basis.

Many property investors have become concerned that the capital growth element of their buy to let property investment is coming under threat after several years of upward momentum.  The figures recently released indicate that, in 2016, at least that was not the case.


Headline statistics

For November 2016:

  • the average price of a property in the UK was £217,928
  • the annual price change for a property in the UK was plus 6.7%
  • the monthly price change for a property in the UK was plus 1.1%
  • the monthly index figure for the UK was 114.3 (January 2015 = 100)

Estimates for the most recent months are provisional and are likely to be updated as more data is incorporated into the index.

Economic conditions

The Government’s commentary on the figures confirmed that housing market indicators for November suggested a period of modest increasing demand and steady growth in price levels.

The house price increase of 6.7% in the year to November was  0.3% higher than the corresponding figure in October.

According to the summary produced by the Bank of England of business conditions, for the final quarter of 2016 (October to December) , housing market activity has recovered following a period of weakness after the EU referendum and stamp duty changes but remains weak in central London.

Between 2012 and the beginning of 2016, annual house price growth in London was generally the fastest of all regions in the UK. Annual house price growth in the East of England and the South East has now surpassed that of London for the 4th month in a row.

Housing Demand

In terms of housing demand, the Royal Institution of Chartered Surveyors (RICS) market survey for November reported a modest increase in new buyer enquiries.

Per the Bank of England, the volume of lending approvals for house purchase (seasonally adjusted) increased by 0.2% from October to November 2016 which was 3.7% lower than November 2015.

Based on figures released by the UK Property Transaction, the number of home sales in the UK (seasonally adjusted) increased by 0.8% between October and November 2016 which 7.3% lower than November 2015.

On the supply side, RICS reported no change in new sales listings in November 2016 compared to October 2016.

In October 2016, total new housing was 12.6% higher than in October 2015.

Regional Variations in Price changes

The following areas were higher than the national average annual increase of 6.7%: –

East of England – 10.5%

South East – 8.6%

London – 8.1%

West Midlands – 7.4%

East Midlands – 7.3%

Whereas the regional average in the following areas was lower than the national average of 6.7%: –

South West – 5.7%

Northern Ireland – 5.4%

Yorkshire and The Humber – 5.1%

Wales – 4.1%

Scotland – 3.3%

North East – 3.2%

Capital Growth

Long term property investors are aware that there will be numerous fluctuations in the rate at which the capital element of their investment accumulates over the passage of time.  Whereas the financial returns on the rental yield element of the investment normally remain relatively consistent, the capital element can vary considerably.  Over the long term however the trend has remained significantly positive as UK property capital growth has consistently risen year on year.

As with any investment the timing of entry and exit from the market will determine the actual size of the profit (or loss).

Source Investments

Whether you are an existing property investor looking for advice on where to go next or a potential new investor wondering whether this is a good time to get into the market we are well placed to help you decide.

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