The UK housing market has seen some turbulent times over the last few years. Since the economic crisis that saw the UK Government bail out the banking industry, year-on-year house prices around the country have plummeted, with the exception being the nation’s capital. UK property is, and has always been, two different markets. According to the UK Land Registry, the government department responsible for keeping and maintaining the Land Register of England and Wales (Scotland has its own system), the average house price outside London is £159,999 ($251,294), while the average price in the capital is £340,308 ($534,487).
London has survived the economic turmoil over the last few years, which has seen the rest of the nation’s house prices fall by almost 10% from their 2006 high. Prices in the capital have continued to creep up, albeit at a fairly slow pace, and any investor looking for property in the UK needs to understand the extremely diverse market and the importance London plays in house prices in the other regions. Property around the country varies by over 300% and the farther from the nation’s capital you go, the lower the price. The lowest prices can be found in the North East, where high unemployment, poor infrastructure and lack of investment have seen the average house price dip below the £100,000 mark. And things are only going to get worse.
Housing boom
UK house prices boomed from the late eighties and many housing experts agree that property was just too unaffordable. Of course, as mortgage lenders were offering 100% mortgages with nothing more than a few hundred pounds required to secure a home, easily available on 0 credit cards, nobody minded the high prices. The banking crash changed all that. Now, first time buyers need to find 10 to 15 percent of the asking price before they’ll even be considered for a mortgage. The result – cascading property prices throughout the UK as fewer and fewer homes are being sold. The reason London has survived is pure economics. London is the heart of the UK economy, with all investment banks, the stock market and other financial markets crammed together in the city. Its growing population of 7 million is continuously jostling for room in a city, as a result, many London workers commute to the capital from the nearby Home Counties, which is the reason these areas have such high property values than those farther away from the capital.
Falling Prices
In the last twelve months, average property values rose by 2.9% in
Photo courtesy of David Iliff
London and its bordering counties, but everywhere else they fell, with the North East, the region farthest from the capital, experiencing the biggest drop of 6.9%. But London isn’t immune to falling house prices, with many analysts predicting a slow down and probable fall. So where does that leave potential property investors looking to make money? The answer is not easy. The market throughout the country is tumultuous and with trouble in the Eurozone, future predictions are almost impossible to make, but there are some tantalizing prospects for the clever investor.
Infrastructure
Anyone thinking of buying property in the UK needs to look at London and recognize the importance the city plays in house prices throughout the country. Because of London’s limited size and limited number of houses, governments past and present have been trying to find a way of easing the burden on housing by encouraging more growth outside the city. One recent project that is possibly set to alter the housing landscape outside the capital is the proposed High Speed Rail Link (HSRL) that will connect the capital with the country’s second city, Birmingham. Birmingham is nestled in the West Midlands at the heart of the country, some 100 miles from the nation’s capital. However, with the introduction of the new rail link, Birmingham will be less than 50 minutes away from London, allowing far more freedom for London workers to move away from the city.
Currently, the average house prices in the West Midlands area is at an average of £176,576 ($277,330) but by 2025 when the rail link is fully operational, these prices could rocket, meaning any West Midlands property purchased now, could provide a worthwhile investment for the future. And it’s not just the West Midlands that will benefit. High speed rail links connecting Birmingham to Manchester in the North West, and Leeds even farther away could see dramatic increases in average property prices in these cities too, albeit it, perhaps not as extreme.
