The UK’s Changing Two-Tier House Market

So far, 2017 has proved an interesting one for the UK housing market. One changing dynamic stands out in particular is the speed at which northern regions have overtaken London and the south as the top tier in a two-tier market.

The evidence for this has been growing for some time, with two recent, reliable reports highlighting it as a continuing development. Data in both the Royal Institution of Chartered Surveyors July report and online state agency Rightmove’s August update, made it clear that prices in the midlands and the north of England are in the ascendancy.

“House price growth in London and the south stalled some two years ago and despite some pockets of growth, have generally failed to get going again,” said Denhan Guaranteed Rent. “With affordability so stretched in and around England’s capital, it’s no wonder house prices elsewhere have become more attractive.”

Middle England Benefits Most

The RICS report showed that a balance of just +1 surveyors reported house prices rose in July – down from +7 in June. The regional detail, meanwhile, indicates house prices are rising in Northern Ireland, the west Midlands and south west England, And, while the number of surveyors reporting falling house prices in London exceeded those who said prices there rose, yet again, the balance of surveyors reporting house price gains in the south east of England fell in July, to the lowest level since 2011.

Evidence of a flatter national average might be taken as good news. But, in reality, prices where affordability is good are rising and where it’s too high, prices are falling, but still remain out of reach. Not quite as good a picture as some might hope for.

Rightmove’s early August housing market update, meanwhile, highlighted a number of regions in and around the Midlands as property hotspots.

Property price declines in London continue to weigh in the national average level of asking prices, however, eight counties are going through a bit of a ‘mini-boom’. Those regions where prices have risen the most on an annual level in August are, Northamptonshire where prices were 9.1% higher in early August compared with a year earlier. Prices rose 7.9% in Derbyshire over the same period and by 7.4% in Norfolk.

HS2

Of course, the long march of rising house prices in southern England has pushed them beyond the reach of many and what goes up, almost always has to come down again. But, the finalised details of the high-speed rail links, HS2, have added to veracity at which house prices in the midlands and north have risen.

That’s partly because the new fast train services will put London within an hour or so’s travel from more cities and regions, making them contenders for London commuters. As the HS2 project continues and more towns become closer to London -  in terms of rail travel - it’s likely there will be strong house price rises elsewhere, too.

Some investors will get there first, but home-owner occupiers working in London, who want a bigger family home or a special weekend pad will be able to find the right property at the right price too. While that price might be higher than some of the local workers might be willing to pay but still much lower than the prices on offer in London and the south east.

“HS2 will do a good job of making the UK a little smaller in terms of travel and some parts of the country will move firmly into London commuter belt territory,” said Proskips. “We don’t know how long the middle England ‘mini-boom’ will last, but right now looks like a good time to start looking further afield if you want to buy a home before price get pushed too much higher.”