Northern property prices are up while London is in the doldrums

20 April 2018

The North-South divide continues but when it comes to property prices, the North is performing better. While it sees continued growth, the South East – and particularly London – are faced with falling house prices. 

House prices in the capital fell by 1% in the year to February first annual decline since 2009 and a drop in value of almost £5,000 over the year, according to the UK House Price Index (see on).

Sam Mitchell, chief executive at online estate agent HouseSimple, says: “We are seeing two very distinct markets going in opposite directions. The North, buoyed by favourable stamp duty cuts and strong employment, is seem a mini-boom. Meanwhile, the South hasn’t enjoyed the same boost from stamp duty cuts and is showing signs of a prolonged slowdown as affordability remains an issue.” 

Key stats at a glance

  • UK House Price Index for February 2018: House prices up by 4.4% annually. Average price of UK property: £225,047. Monthly change: -0.1%
  • Halifax House Price Index, March 2018: House prices up by 2.7% annual. Average price of a UK property: £227,871. Monthly change: +1.5%
  • Nationwide House Price Index, March 2018: House prices up 2.1% annually. Average price of a UK property: £211,625. Monthly change: -0.2% 
  • Rightmove House Price Index, April 2018: Asking prices up by 1.6% annually. Average asking price of a UK property £305,732. Monthly change: 0.4%

Lack of new properties 

Enquiries from new buyers are down heavily on last year, with commentators saying that a lack of new properties coming to market is holding back demand. 

The RICS UK Residential Market Survey for March shows that 17% of surveyors have seen a fall in demand from would-be buyers, while sales are down 20% compared with March last year. But lack of supply may help underpin prices; some 47% of respondents to its survey anticipate prices will rise over the next 12 months. 

Simon Rubinsohn, chief economist at RICS, says: “The latest results provide little encouragement that the fall in housing market activity is likely to be reversed anytime soon.”

Steve Seal, director of sales at Bluestone Mortgages, adds: “There is still a fundamental lack of housing and, as long as this remains, prices will continue to creep upwards and exacerbate the already stretch affordability of buyers.” 

That’s certainly reflected in the Rightmove House Price Index, which shows asking prices climbed by 0.4% in the month to a record £305,732 – some £1,228 more than the month before. On average, homeowners are agreeing to sell for 3.3% less than their asking price – equivalent to £10,227. 

The website recorded more than 142 million visits in March, its busiest ever month, suggesting that interest from buyers is still high even if sales have slipped. 

Rightmove director Miles Shipside says properties in popular locations with the right specifications are helping to push prices higher. 

Properties are currently taking an average of 61 days to sell, down significantly from 72 days in January. 

“Everywhere but London is showing growth”

The latest figures from the UK House Price Index indicate property prices grew 4.4% in the year to February, taking the average property value to£225,047.

Property prices slipped 0.2% between January and February but this masks regional differences. Prices in England were actually up 0.2% in the month, but this was offset by a -0.4% fall in property prices in Wales. 

Ishaan Malhi, chief executive at online mortgage broker Trussle, says the slowing of house price growth would be welcomed by anyone gearing up to buy their first home. 

He says: “We’re also finally beginning to see wages pick up pace, which should be a confidence booster for first-time buyers.” 

The greatest gains were seen in the North East, where prices were up 3.1% in the month, followed by the West Midlands at 2.2%. 

London suffered the greatest prices falls in England, with prices down -2.1% between January and February 2018 – the biggest drop since May 2011.

RICS’ Mr Rubinsohn adds: “The downshift in sales is more visible in London and the South East than many other parts of the country and feedback suggests this divergence will persist over the coming months.” 

Lucy Pendleton, founder director of independent estate agent James Pendleton, comments:“Everywhere but London is growing in real terms ahead of inflation but, beware, that’s only because the playing field wasn’t level to begin with.

“The explanation partly lies in the fact that the rest of the country is still getting a shot in the arm that London struggles to benefit from. That medicine, masking any true underlying trends, comes in the form of the Help To Buy scheme that imposes a price cap (£600,000) that feels relatively low across most of the capital.”

Halifax reports house price growth 1.5% in March, with prices some 2.7% higher than a year ago. The average property price in March hit a new record of £227,871.

As well as not benefiting from cuts to stamp duty, which are available on properties worth up to £500,000, first-time buyers in the capital are also less likely to make use of the Help to Buy scheme, which imposes a price cap of £600,000. 

Finally, Nationwide reports that prices advanced 2.1% over the past year, but slipped by 0.2% in February, putting the average house price at £211,625. 

Robert Gardner, chief economist at Nationwide, says: “Low unemployment and low mortgage interest rates together with the lack of properties on the market is likely to provide some support for house prices. But, overall, we expect price to be broadly flat, with a gain of around 1% over the course of 2018.” 

Nationwide says regions in the North of England have recorded stronger annual house price growth than those in the South for the fourth consecutive quarter. However, the strongest gains were seen in Northern Ireland, where prices are up 7.9% over the past year, though they are still some 38% below their 2007 peak. 

Jonathan Hopper, managing director of Garrington Property Finders, says the market is functioning but cautious: “There’s a world of difference between prices slowing and sliding, and most homeowners are seeing the former. Insipid though it may be, growth is still growth.” 

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