The difference in house prices between the North and South of England is predicted to narrow over the next five years, according to new research.
Published by Savills, analysis has revealed that property values could rise substantially in some areas of the country. However, this increase is looking far from even with rises of around 21.6 per cent predicted for the North West of England, compared to just 4.5 per cent in London.
Looking at a national level, Savills predicted an average house price increase of 14.8 per cent, which would, in theory, add £32,000 to the average house price in the UK bringing that price up to £248,086 by 2024.
Narrowing regional house price differences
But it’s the regional differences that have garnered the most interest around this research. As previously mentioned, London is looking to be one of the slowest growth regions, perhaps due to the fact that London property already has an increased value compared to the rest of the country, having witnessed a massive 72 per cent price increase in the last 10 years.
Conversely, the North West including Yorkshire and the Humber are predicted to see the largest house price increases, potentially rising by as much as 20.5 per cent, followed by the West Midlands and East Midlands. Scottish house prices are predicted to rise by as much as 18.2 per cent and the North East of England is expected to see house prices increase by a healthy 17.6 per cent.
Among the hot spot areas cited by Savills are Manchester and Birmingham. The report also suggested that Welsh house prices could be showing particular signs of growth in the coming years as the country feels the effect of the abolition of the Severn Bridge toll.
Savills explained the current trends impacting on their house price forecasts: “The likely trajectory of interest rates and underlying Brexit uncertainty has been at the heart of a slowing in levels of UK annual house price growth…In the short-term sentiment will remain the primary driver of house price movements.”
House prices post-Brexit
The research has generated a lot of media discussion around the North-South divide. But it’s also worth noting that Savills’ predictions here are in stark contrast to others that have suggested a much bleaker outlook for the UK in the year’s post-Brexit.
The Bank of England made the drastic prediction that the UK could see falls in house prices as high as 35 per cent in the fall-out from Brexit. Savills’ average of 20 per cent is surely welcome news for investors and homeowners alike.
It is, however, dependent on how Brexit negotiations proceed; as Mr Cook puts it: “Sentiment is exposed to how Brexit negotiations proceed and, specifically, the perception of what the outcome will mean for household finances.”
Until the negotiations show some level of clarity, no great movement in house prices is expected to take place in either direction.
Back in October, the Office for National Statistics (ONS) and the Land Registry reported that the price of a UK home increased by 3.2 per cent in the year to August 2018, putting it at £232,797. London again cropped up as one to watch for all the wrong reasons as the only region to show a decline in prices on an annual basis, with prices dropping 0.2 per cent.
Despite this, the capital remained the most expensive place to buy a home in the UK with average prices of £486,304. Richard Snook, senior economist at PwC, commented at the time, echoing the sentiment we’re now seeing from Savills: “London remains the biggest regional story as the price decline continues, albeit at a modest rate. Prices in August were 0.2 per cent below their level 12 months ago.
“The London market has been flat over this period, with Brexit-related uncertainty undoubtedly affecting the confidence of buyers and sellers alike.”
Exactly how Brexit will impact the market remains to be seen, but Savills have noted they will be watching closely to see how household finances, in particular, will be affected, as well as monitoring average earnings and of course interest rates.