North South Property Divide

by Mark Johnston

In the current climate rentals are at an all time high, property values however do not follow the same trend. There are widening regional gaps developing in property valuations.

The divide in the property market is particularly prominent between London and the north of England, where the gap is widening rapidly.

London remains the only region where house prices are rising in England and Wales annually.

Data shows that house prices in London remained positive over the past 6 months while in most other regions the prices have either fallen or remained static.

Chris Gardner of mortgage website, obligo.co.uk said “the regional trending of prices, with London weathering the storm and the rest of the United Kingdom (UK) more vulnerable, is an accurate reflection of where the market is actually at”.

The land registry reported that house prices in London have increased by 6.2 percent, but the value of homes in most northern regions dipped and the biggest fall was seen in the north east, 3.3 percent.

Research has shown that the average price of a home in London is a staggering £346,416, whilst in Yorkshire and the Humber the average price is a mere £122,083. This means the approximate cost of an average property in London is 340 percent of that in the north east.

This divide is likely to grow even more in the future as government spending cuts take affect and looking ahead with these cuts still happening up to 2015 they could exacerbate this north-south divide . Mark Boyce, credit analyst said “given the north’s public sector jobs bias we anticipate that unemployment in those regions could escalate”. If the United Kingdom’s (UK) already fragile economic recovery falters it could put many home owners in the north at risk of negative equity or mortgage arrears.

According to ratings agency Standard & Poor’s (S&P) the proportion of homes in negative equity at 16.2 percent in the north east, but just 2 percent in London.

With these figures in mind borrowers in the north are 35 percent more likely to be in arrears than borrowers in the south. This is partly due to the divergence in underlying employment and housing dynamics between the north and south of the country.

Many credit analysts believe that the gap in north-south arrears is due to the robust employment trends evident in the south since the start of the recent downturn in 2007.

Current figures have also shown that during May 2011 the number of completed house sales in England and Wales dropped by 10 percent to 46,870 from 52,170 in May 2010.

Sales outside of the capital can now take twice as long as those within it. Properties in London are on sale for approximately 6 weeks before coming ‘under offer’ however the same can not be said for properties in Yorkshire and the Humber where they are generally on sale for approximately 11.9 weeks before coming ‘under offer’, according to a survey for the hometrack website.

Price rises in London continue to put a gloss on the overall market conditions, limiting the real scale of house price fall across the rest of Britain.



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