UK house price gap continues to widen

Published 26th Dec 2009

As 2009 comes to a surprisingly upbeat close, some homeowners are struggling to feel the joy. House price surveys might universally be showing recovery in the property market, but a new report hints at what many observers have suspected to be true: the gains are being felt only for some types of homes in some areas.

A survey of homes for sale this year by FindAProperty.com, the search website, shows how the rate of house price growth is as high as 7.1 per cent in London, while average prices are 12.2 per cent down in Scotland.

Nigel Lewis, of FindAProperty, said: “This year’s ups and downs mask considerable variations between the winners and losers. Different regions, cities and different types of property performed extremely variably.”

The survey of the asking prices of homes advertised on the website show that, rather than penetrating the regions, the recovery has been restricted to London and its commuter hinterland in the South East. These two regions are the only ones showing house price inflation year on year, on average.

The North West and the East and West Midlands, in particular, are trailing.

Within the regions, the website’s lists of winners and losers of 2009 show that Brighton and Southampton were the stars, with properties there increasing by 5.9 per cent and 4 per cent, respectively.

Northern cities trailed, with both Newcastle and Manchester suffering double-digit declines in asking prices. Sheffield and Merseyside were not far behind.

In London, the average house (at £434,923) is on the market at £28,675 more than it would have been a year ago, but the capital has not escaped unscathed. The effect of troubles in the City can be seen in the performance of the boroughs: Greenwich, a sought-after area in South East London within easy reach of Canary Wharf and popular with younger professionals and families employed there, has suffered this year, dropping 8.7 per cent.

Mr Lewis said: “The oversupply of new-build property around the Cutty Sark and Woolwich Arsenal has partly been to blame for the dip in prices.” The nearby areas of Lewisham and Tower Hamlets, also well-supplied with recently built apartment blocks marketed at first-time buyers, have also underperformed.

The star area in London was Westminster, an established location that only recently has been accepted as a prime Central London residential area. Average values were up 18.2 per cent there — yet in Islington, which similarly has moved up the social scale and is centrally located and popular with affluent City workers, barely appreciated, with price rises of only 0.8 per cent.

The boroughs of Harrow and Merton, rich in family homes and good schools, outperformed, beating even Kensington and Chelsea, which has benefited from an influx of foreign money. Hounslow and Barnet have risen up the ranks as buyers opt for family-friendly areas that are priced within reach.

For those going to market this year, the ideal home to put up for sale was a five-bedroom house. According to FindaProperty, these homes rose in value by 5.6 per cent over the year and now cost on average £541,095. Two-bed homes, popular with first-time buyers but perceived as too small for families, are 2.9 per cent down. Three-bedroom or larger flats — a rare commodity, especially in new developments — were the only kind of apartment to increase in value, rising by 2.1 per cent. One-bedroom flats, which have suffered from the inability of aspiring first-time buyers to secure mortgages and less demand for city pied-à-terres, fell by 5.5 per cent.

Mr Lewis said that smaller units appealed to less affluent buyers, who were unable to move because mortgages were not freely available, while the value of larger houses and flats has been pushed up by those less reliant on borrowing. He said: “A lot of recent housebuilding has focused on flats, not houses, and this has added a premium to larger family home.”

FindAProperty says that the property slump, widely forecast for 2009, did occur, but was restricted to the first three months of this year. The market improved substantially from April, the report suggests.

Most agents are predicting a buoyant start to 2010 before the general election and economic ailments push prices back into reverse. Yet FindAProperty says it believes that the market has turned already, with the first fall in asking prices in eight months recorded in November.

Mr Lewis predicts that there will be a “second dip” in January and February. He said: “Indications are that the mini-recovery is running out of steam. House prices at all levels are down and further declines are to be expected over the quieter end-of-the-year period.”

Several agents, among them Savills and Knight Frank, predict that the slow economic recovery will cause house prices to fall again, but not to the lows seen early in 2009. Prime homes in London and the country are tipped to outperform, as demand is bolstered by City and foreign cash, but the outlook for more modest homes will be stung by growing unemployment, higher taxes, the prospect of rising interest rates and uncertainty surrounding the election.

However, as agents and economists put the finishing touches to their forecasts for 2010, Mr Lewis warned: “There’s not one UK housing market but a series of micromarkets.”

Source: ' Times '

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