While many people talk of the North-South divide as regards the UK economy it seems this statement is also highly relevant to property markets. A report by Hometrack shows that the difference between average property prices in London and Newcastle have reached a record 20 year high. The average property in London is valued £437,700 while the figure for Newcastle is £121,900. There would appear to be a number of reasons for this ever-growing divide which we will cover below.
Regional economies
While the UK economy as a whole has been fairly buoyant of late, especially compared to European counterparts, it does seem as though the regional variation in performance is stark. When you bear in mind that a buoyant economy is required to put cash in the hands of property buyers it is perhaps no surprise to learn of the growing gap. In some ways it is a little unfair to compare the North to the London market because as we know the London property market is a law unto itself. In many ways we should perhaps look at the London market and the rest of the UK.
On a more upbeat note, it has to be said that the UK economy in general is performing better than its peers and this is likely to continue for the foreseeable future. Even if areas such as the North of England are not able to keep pace with London they will still be dragged higher in the long-term.
Affordability factor
Much has been made of the recovery in UK earnings to relative levels not seen since the 2008 worldwide economic downturn. When you bear in mind that this figure takes in the buoyant London “economy” there is an argument that in real terms incomes in areas such as the North of England bear little or no resemblance to the South of England. Indeed, depending upon how you read the economic data of recent times there is an argument to suggest that relative earnings in areas such as the North of England are still significantly down on their 2008 levels. It is also worth noting that the situation is still difficult in the Midlands although a little better than the economic environment in the North.
Ever more stringent mortgage regulations and a requirement for larger deposits are not helping the situation for first-time buyers.
Can the Conservatives deliver a balanced UK economy?
While the Conservative Party was able to secure majority in this year’s general election many have not forgotten the promise to deliver a “balanced” UK economy. It has been evident for many years now that the UK economy is more skewed in favour of London and the South of England where the majority of public services are based. Indeed when you take into account the London financial markets the difference is even more marked.
As long as we can remember “experts” have been suggesting that eventually property investors in London and the South of England will “emigrate” North where there is a perceived greater value for money. However, rather than property investors banking profits on their London and South of England assets they continued push these markets higher, often at the expense of the Midlands and the North, which is widening the gap in average property prices. At the moment there does not appear to be a quick fix for the Conservative Party with the likelihood that the gap will continue to grow. Indeed, the delay/cancellation of the HS2 high speed rail link has probably set this challenging balancing act back another could of decades?