For some time now we have been discussing the very different directions of the UK housing market set against the London housing market. While many people would suggest that the London housing market has dragged the UK higher in years gone by, and also lower in difficult times, the situation does seem to be changing. Information released by Your Move has cast a very interesting light on the London property market which is under severe pressure.
London house prices
Capital house prices have fallen by 2.6% over the last 12 months although the likes of Wandsworth, Islington, Southwark and South London have experienced falls of up to 15%. Even though nationally UK house prices have increased by just 0.6% over the last 12 months, this is a significant improvement on the capital figures. It is evident that many areas of London which attracted speculative property investment in recent times are struggling today. We have also seen an array of new £1 million flat developments mothballed and, while they will likely come back on stream at some point, it may be some time before the market is ready.
North West of England
London has been centre stage when it comes to UK house prices for many years now and those who write London off may be a little premature. However, at this moment in time it is the North West of England which is the fastest-growing property market in the UK.
Over the last 12 months we have seen prices in Blackburn increase by 16.4%, Warrington by 10.3%, Merseyside by 8% and Greater Manchester house prices have increased by 4.3%. It is fair to say that many of these markets have moved from a relatively low base so we’re not really comparing like for like when looking towards London. However, are we starting to see a sea change in the attitudes of UK property investors?
Signs of encouragement
We all know that the London housing market is suffering from the Brexit issue as some of the world’s largest financial companies consider switching their head offices to the likes of Dublin. This will ensure that whatever the UK agrees with the European Union, they will maintain their presence within the EU and their financial services passports. However, in a surprise development recent economic data shows that earnings growth is now averaging 2.5% per annum and we are in a situation where earnings are growing faster than average UK house prices.
It will be interesting to see what level of support this surprise jump in average earnings offers to the UK housing sector. Recent data also shows that 95% mortgage agreements are at record high levels which should be cause for concern when you bear in mind the fragility of the UK economy at the moment. Will we see mortgage companies rein in their 95% offerings?
It is becoming more evident that London and the rest of the UK are detached when it comes to house price trends. This has been evident for some time because London, whether upward or downward, tends to move well before the rest of the UK. There is an argument that the recent fall in London property prices is simply a case of “blowing the froth off the market” but time will tell.