The property market is on the move again, the latest data from the Land Registry show that the average price of a house in England and Wales in September 2013 was £167,063. This was an increase of 1.5% over the previous month and 3.4% over 1 year.
Positive short term outlook
When property prices start to rise we all feel better off and tend to increase our spending which helps drive up the economy, or so the theory suggests. Also banks are inclined to be more flexible with their lending if an asset is growing in value. Add into this mix Help to Buy 2 and it seems house prices will continue to grow - at least until interest rates start to rise again.
This all sounds good news with the hope that the property market slump, which started in 2008, could soon be a distant memory. Between January 2008 and September 2013 property prices in England and Wales fell by 7.95% and therefore a couple years of decent price growth could put prices back in positive territory in a couple of years.
London average figures mask the reality
Unfortunately, when it comes to property prices the devil really is in the detail. Live in one region of England & Wales and the average price has actually increased over the last five years, but live in another region and you are staring at the average price being 20% less than it was 5 years ago. This is before taking into account the impact of inflation which would exacerbate any falls in real terms.
Table 1 below gives a regional breakdown of average house prices from January 2008 to September 2013.
Negative equity - north/south divide
Taking England and Wales as a whole, the average house price has fallen by 7.9% from January 2008 to September 2013. In this period people owning a property in London have seen average house price growth of 12.2%, making it difficult for new buyers to raise a deposit and take the first step on the property ladder. On the other hand, those living in the North East have seen the average house price fall by almost 21%, which may mean another 5 years before average house prices get back to the 2008 level.
Not only do the figures show that there is a north/south divide in the property market 'recovery' but it also suggests that there is a north/south negative equity divide.
Table 1 - house price winners and losers since 2008
|Yorks & Humber||£144,364||£114,722||-20.5%|
Data from the Land Registry
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