London house prices are growing at a slower rate than the rest of the country, suggesting the housing market may be experiencing an unusual north/south flip.
The capital’s performance shows a stark contrast to property markets further north - particularly in the East Midlands and North West - where annual price growth is strong.
These recent stats suggest the north/south growth divide has been reversed, with the trend of London’s property success turned on its head.
The North West witnessed the largest rise in both annual and monthly property prices - up by 6.5% and 2.3% respectively. The East Midlands, South West and Eastern regions all saw prices go up by 6.4%.
Manchester’s property boom
According to a report from HomeTrack, Manchester and the surrounding areas are doing particularly well in the North West.
The report found that of all cities, Manchester had experienced the strongest housing market in August. The city demonstrated annual house price growth of 7.3% year-on-year to the end of the month. And with the emergence of several trendy suburbs, a booming business and media industry in the city centre, and excellent schools and transport links, it’s easy to see why Manchester is such a hit with buyers.
London’s fall from grace
Meanwhile, although house prices in the capital are still far higher than property prices elsewhere, annual house price growth in London is following a downward trend. The city saw just a 2.5% rise over the year and since July has seen a 1% drop.
Richard Snook, senior economist at PwC said: “London remains the weakest performing English region, and the August figures show the average price of a home fell by £5,000 to £484,000.
“Prices are now just 2.5% higher than they were a year ago. With overall consumer price inflation at 2.7% in August, this means London’s house prices declined in real terms.”
Turning the north/south divide on its head
Senior economist Tim Moore adds: “Regional figures for the third quarter show the north-south divide flipping on its head; annual price growth in London and the South East has slipped well behind northern England, and indeed the Midlands.”
Some experts believe London’s fall from grace has been a long time coming. Jonathan Samuels, chief executive of property lender Octane Capital, says that a correction in London property prices might not necessarily be a bad thing.
He said: “The London property market has been the victim of its own extraordinary success. Prices in the capital rose to such a level that a correction was always on the cards.”
A significant house price drop seems unlikely
Jonathan Samuels reassures homeowners and investors that despite London’s fall in property growth, it’s unlikely to experience a dramatic fall in prices. He adds: “Extreme supply issues within the M25 coupled with always-on demand will mean the London market can only fall so much.”
With a lack of available homes helping to inflate prices across the UK, the general consensus is that property prices show no sign of falling any time soon. Although this is good news for homeowners and property investors, it offers little respite for first time buyers hoping to get a foot on the ladder.
According to the UK House Price Index for August 2017, house prices are up by 5% annually and the average price of a UK property now stands at £225,956.
Are you hoping to buy a property in the North? Manchester mortgage brokers TaylorMade can help. Please get in touch with our team to learn more today.
