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It’s colder up north, you’re more likely to be served fish’n’ chips than pie’n’mash and the people are friendlier, but regional differences that go beyond common stereotypes are troubling housing market economists.
The divide between the value of homes in the South compared with similar properties in the North is long established. Since the Land Registry began compiling its house price figures in 1995, housing in London and the South East has always been more expensive than it is farther north. For example, average house prices in 1995 were £92,212 in London and £72,108 in the South East. In the North East, the average cost of a home was £55,057. Fast-forward 14 years and those figures are £302,411 in London, £187,124 in the South East and £106,769 in the North East. Prices in London have more than tripled, even with the most recent falls, while those in the South East are roughly two and a half times higher. In the North East, however, they have not quite doubled over the period.
The divide is becoming more pronounced during this latest cycle of price falls, as a sales update from the developer Bellway showed. In a statement last week, it said that its southern-based divisions had performed more strongly than those in the North, and that it envisaged turnover in these areas being much higher by the year end than those in the more “fragile” markets in the Midlands, Yorkshire and the North West.
The timing of this observation coincides with other data showing that economic recovery has, so far, been stronger in southern regions. The latest house price data from the Land Registry and the Royal Institution of Chartered Surveyors (RICS) suggests that wider economic factors have affected the speed of house price recovery. Last month, the Land Registry recorded that prices increased in London, the East Midlands, West Midlands, the East, Wales and the South East. They fell in the North West, Yorkshire and The Humber, the South West and the North East. In May, the RICS found that a greater percentage of surveyors reported price rises rather than falls in London, Scotland, the South East and the South West than in northern regions.
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Ian Perry, of the RICS, says: “The market has come awake sooner in the South East. This is partly a result of homeowners here having more equity in their properties because house prices have risen more over the years down south. People also earn more in the South, but basic living costs are not that different, so buyers have more disposable income to put towards house purchases, and because of higher house prices, they need to commit more funds to buying.”
In the current market, the more equity/more income combination in the South is a major cause of the growing divide. The lenders’ own statistics back this up. Only 27 per cent of Nationwide’s lending is to northerners, with almost all the remainder going to borrowers in the South. This imbalance is common, according to the Council of Mortgage Lenders. Its figures show that borrowers in the South borrow less as a percentage of the property value, at 71 per cent, compared with 75 per cent in the North.
Optimists might think that at least this means house prices might be more affordable in the North. Not so, says Propertyfinder.com, which has found that the farther south and east you go, the more likely you are to find property as affordable as it was in 2000 and 2001, as a result of bigger increases in average earnings. Go north and west, however, and you are likely to find that affordability levels go back only two or three years. For example, relative to income, house prices in Bromley, in southeast London, and Havering, northeast London, top Propertyfinder’s most affordable league, while Berwick-upon-Tweed and Hartlepool rank as least affordable. Nicholas Leeming, of Propertyfinder.com, says: “The boom came later in the North, so affordability has not improved as much.”