Historically when we talk about a North-South divide in the UK housing market it tends to be prices in the South going up and prices in the North trailing in relative and often real terms. The situation would seem to be changing according to surveyors across the UK, having seen increased sales in Scotland, North-East of England and Wales while the rest of the UK flatlines or dips. This will surprise many people but when you take a step back and look at the situation from a distance perhaps those years of outperformance in the South of England are catching up?
Relative values
We know that the cheaper properties in the UK tend to be towards the North of England and Scotland with Wales also showing some pockets of value. During the month of October a poll amongst UK surveyors showed that 20% more surveyors have seen a fall in new buyer enquiries than an increase. The same number of surveyors also saw a decline in transaction numbers right across the UK but again there was a very distinctive North-South divide.
Historically, although not right across the board, the North of England has tended to offer limited capital appreciation but very attractive rental yields for the buy to let market. The South of England housing market seems to depend more upon capital appreciation than it does rental yield when calculating overall returns. There are obvious pockets in the North, South and Midlands, not to mention Scotland, Northern Ireland and Wales which go against this trend but the split is there.
London house prices
As we have mentioned on numerous occasions it is perhaps best to look at the London housing market as a market in its own. It often bears little or no resemblance to the overall UK market and the same can be said at the moment. The same survey showed that two thirds of surveyors reported a drop in the price of London houses during the month of October. This is the lowest figure we have seen since 2009 which was in the midst of the financial crisis.
Economic uncertainty and concerns that the Conservative government is on the brink of collapse tend to impact London house prices more than anywhere else in the UK. The London financial markets and business arena need a strong government, one in total control of its decisions and it is fair to say that Theresa May is more of a zombie than a strong leader. Many believe it is only a matter of time before the government collapses with Jeremy Corbyn waiting on the sidelines to take advantage.
No pre-Christmas flurry
It is interesting to see that many estate agents are reporting a significant lack of interest in the moving before the housing market effectively closes down for Christmas. September and October are traditionally relatively active months with buyers and sellers hoping to tie up deals before the New Year. Even though the recent base rate increase was relatively small at just 0.25% it is indicative of the short to medium term outlook for interest rates. While they are not expected to rise sharply they have turned a corner and the 0.25% increase was passed on in full by many mortgage providers.
Economic uncertainty, a government on the brink, troubles with Brexit, an increase in interest rates and seemingly ever rising moving costs have all come together to form the perfect storm for the UK housing market. Time to batten down the hatches and wait for house prices to recover!