GROWING gaps are appearing in the housing market, Vicky Shaw reports on the phenomenon
Anyone reading about the housing market recently may have noticed a common theme emerging - “mind the gap”.
According to property analysts Hometrack, the gap between house prices in London and those in other major cities is at its widest in 20 years.
Meanwhile, separate research from Nationwide Building Society has found the gap between property values in Southern England and those in the North of England and Midlands has reached a record high of more than £150,000.
The widening North/South gap means a homeowner in Southern England, where the average property value is £303,811, could buy two properties in Northern England, where a typical house costs £150,851.
While house prices in London have surged by 10.6 per cent over the last year according to Nationwide’s figures, those in Wales have edged up by only 1.9 per cent, while prices in Northern Ireland have seen a 6.5 per cent year-on-year increase.
Meanwhile, house prices across Scotland have fallen by 1.3 per cent.
So with property markets behaving very differently, what would the price of a home in London get you in other parts of the country?
Well, according to Hometrack’s figures, the average property price in London now stands at £437,700 on average.
That’s more than 12 times average national earnings and means someone could now buy around four typical homes in Glasgow, or three in Manchester, or two in Bristol, for the price of one in London.
In Birmingham, where the average property value is £134,800, a buyer could expect to get a 69 per cent discount compared with the cost of a typical London property, while in Liverpool, where a home costs around £109,600, it would be 75 per cent. In Leeds, the average home costs £144,200, giving a buyer a 67 per cent discount and in Newcastle, where the average is £121,900, the discount would be 72 per cent.
But what could these widening gaps mean for the future of the housing market?
Hometrack reckons some buyers may reach a tipping point, where they ditch the idea of living in or near to London completely, and instead set their sights on another city outside the capital offering better value.
Richard Donnell, director of research at Hometrack, says similar cycles in the property market have happened before, often lasting five to six years.
He predicts: “The gap will start to close in the next 12 months and definitely in the next two to three years.”
As property price increases in London become gentler, other parts of the UK could see growth pick up, he says.
An increase in prices outside London is particularly likely if the economy continues to grow and mortgage rates remain low, as this will help households to be confident about taking on mortgage debt, Donnell says.
But buying a property outside London is “not a guarantee” that its value will suddenly start to shoot up in the coming years, he says.
With property markets across the UK being very closely linked to local factors such as employment, some cities and regions may not see much house price growth at all.