House price 'north-south divide' narrows

House price 'north-south divide' narrows

The north west of England has witnessed the strongest growth in house prices over the past year as the London market continues to slow, according to the Office for National Statistics.

The Office for National Statistics’ September UK house price index (HPI) revealed the average house price in the north west rose 7.3 per cent year-on-year and 2.3 per cent month-on-month to £160,951.

In contrast, London house prices rose by just 2.5 per cent year-on-year and declined by 0.2 per cent compared with August.

The average house price in the capital was £483,568 in September.

The figures reinforce the trend witnessed in recent months for stronger growth away from the capital, which had previously experienced booming house prices.

Cities such as Manchester have enjoyed strong economic growth, while buy-to-let investors have been driven away from the capital in search of higher yields elsewhere.

Landlords in London, where prices are already high, have been particularly hard hit by the 3 per cent stamp duty surcharge on additional property purchases and a cut in mortgage tax relief.

Growth in the capital has lagged behind the UK average for 10 consecutive months.

The September figures show the south west saw the second strongest annual growth of 6.6 per cent, followed by the east of England at 6.4 per cent.

The UK as a whole witnessed an annual price increase of 5.4 per cent, taking the average property value to £226,367.

Jonathan Hopper, managing director of Garrington Property Finders, said: “London is now not just the worst performing English region, it is a serial laggard.

"In the 12 months to September, prices in the capital rose at barely a third of the pace of those in the fastest-growing region.

“This shift is being driven by a steady flight of equity from London – and other previously overheated regions – to areas with greater affordability.

“While the impact of this month’s interest rate rise has yet to filter through to the market, acute price sensitivity among buyers is applying downward pressure on prices both in the capital and in other areas that saw the frothiest rates of appreciation.”

Alex Gosling, chief executive of online estate agents, called on the government to take action to boost the housing market in the upcoming Budget.

He said: “It's likely helping first-time buyers will be [the chancellor’s] main focus, but the extra 3 per cent surcharge on second homes has been more damaging to the property market than the lack of first-time buyers, decimating the entire buy-to-let sector.

"Removing the additional 3 per cent tax charge would immediately inject life into a market which feels like it's already closed down for Christmas.”