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There is a North-South divide with house price growth in cities

There is a North-South divide with house price growth in cities
Mark Langshaw

Author: Mark Langshaw - Content Manager

Updated: June 30, 2022

City house price growth is currently sluggish in the South and stronger in the Midlands and North of England, reflecting the growing divide between the regions.

Zoopla’s UK Cities House Price Index found that Liverpool is the highest performing major city in the UK in terms of house price growth, where the price of property increased by 5.7% in the year to March 2019. Other cities with strong growth were Leicester (5.3%) and Manchester (5.1%).

Slowing activity in London, where prices are unchanged (0%) year-on-year, seems to be spreading to other areas in Southern England. Indeed, prices fell by 0.6% annually in Oxford, rose by just 0.7% in Southampton and by 0.9% in Cambridge.

Lower house prices

Despite seeing strong growth, a number of cities in the Midlands and the North still have comparatively cheap house prices compared to the South, so price increases generally come from a lower base.

The average house price is £122,100 in Liverpool, £176,000 in Leicester and £169,300 in Manchester. When you compare that to an average of £399,900 in Oxford and £482,800 in London, it’s clear that despite the current trend Northern house prices have a long way to go to get anywhere near prices in the South.

There’s an argument that perhaps house prices have become too inflated in the South, which explains why growth has flattened now.

Of course if prices up North are cheaper that’s a good thing for you if you’re a first-time buyer. You have a more realistic chance of getting on the housing ladder without parental help, even if you earn less than someone working in London.

This greater purchasing power perhaps explains why prices are rising in the North, as more demand fuels greater house price growth.

Better yields for investors

Buying in the North isn’t just more affordable for you and me; it’s more attractive to investors.

Research shows that average rental yields are highest in the North East (5.02%) and North West (4.81%) of England, with London (3.16%) and South East (3.31%) lagging behind.

Buy-to-let investors are clearly more likely to be attracted by these returns, even if they are based in the capital, as analysis by Hamptons International found that the proportion of London-based investors purchasing buy-to-lets in their home region fell by 17% since 2015.

If investors and your average buyer are competing for properties outside London and the South East, it’s easy to see why growth is stronger elsewhere.

Has Brexit hit London harder?

Clearly the UK’s vote to leave the European Union in 2016 resulted in some uncertainty for buyers across the property market.

However it may be the case that buyers in Remain constituencies have been more affected by a more negative outlook owing to Brexit than in the North.

This may have hit Greater London harder, where just shy of 60% of the population voted to Remain.

Research by OkayLah, a property portal, shows that a number of regions in London have struggled since the Leave vote, with Putney (4.3%), Islington South and Finsbury (-2.8%), as well as Islington North (-1.8%) seeing some of the worst declines in house prices.

The North-South divide

There is a North-South divide when it comes to house price growth, but this is nothing new.

When trying to work out which areas are flourishing and which markets are struggling, it pays to look at the local areas rather than England or the UK as a whole.

The top 20 UK cities in the UK saw house prices rise by 1.7% in the year to March, which completely hides how the cities differ both in terms of price growth and the cost of properties.

Therefore it’s important, whether you’re looking to buy a house to live in or as an investment, that you aren’t misled by headlines about national house prices rising or falling – the key thing is to analyse the state of the local area where you want to buy before making a decision.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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