London’s property market may have been gripped by a slowdown, demonstrated by the Nationwide house price index this week showing a 0.6% year-on-year drop in average house prices in the capital, but the opposite is true of other parts of the country. Over the same period, prices in the West and East Midlands have risen by 4.6% and 5.1% respectively.
Selling times, another important indicator of the strength of a housing market, are demonstrating a similar divergence in trajectory between the South and North of the country. UBS Wealth Management said this week that the average time needed to sell a property in London was 10 days longer than this time last year, as it warned the capital’s property market may be in a bubble.
At the same time, Countrywide research commissioned by The Times showed that the average time required to sell a residential property has fallen ‘in every neighbourhood north of Birmingham’. The average number of days properties in the north of the country are on the market before being sold is at the lowest level since 2007. Homes are also going for a higher percentage of their asking price than at any point in the last decade.
The primary driver behind prices rises and selling times falling in the north appears to be supply restrictions. David Fell, a research analyst for Countrywide explains, as quoted by The Times:
“Fewer homes for sale compared to previous years mean sellers face less competition. Until mid-2016 the number of homes for sale across the Midlands and north was up at 2012 highs. Yet as the market has picked up, we’ve experienced double-digit falls in the number of homes on the market. With less for sale, buyers often get frustrated and are increasingly willing to pay a little more than the asking price to get their hands on the right home.”
Potential sellers seem to be nervous against the backdrop of Brexit and prefer to stay put for the moment while buyers are out in force. Despite the recent changes to what buy-to-let landlords can claim tax relief on, insight provided by estate agents is that this class of buyer is currently very active in the north. Many have sold properties in London and the south east in anticipation of the market there having hit peak and are reinvesting further north where there is still potential for good capital growth and rental returns are also far higher.
Another longer term positive is that while prices from Birmingham up are showing healthy growth, it is generally between 4% and 6% year-on-year. This is considered sustainable and is in stark contrast to the kind of growth figures seen in London over the past several years.
Real estate agents commenting for The Times also reflected that it is the lower and middle sections of the market which are healthiest in the north rather than luxury properties. Around the big northern cities such as Birmingham the market is reported to be thriving ‘below 1 million’ and up to £500,000 outside of the larger, more expensive cities.