House prices in the North on the up

It has certainly been an interesting week with two things keeping my attention – a spectacular fall from Madonna at the Brits and the results of Persimmon. What both tell you are that when you get knocked down get back up again. Persimmon is a prime example of a business well positioned in a market that is growing.

Since the downturn in 2009, a lot of discussion has been around the growth of the house prices in the southern part of England and not just London. This has seen growth of approximately 27% but the point has come where this growth is likely to fizzle out. In the North of England, although there has been some recovery it is marginal in comparison – but alas it looks like the tides are changing with the likes of Sheffield and Leeds leading the way over the next 12 months.
But why is this? Well in contrast to the South, the North only really hit the bottom a couple of years ago, so while the South recovered quicker the North is now leading the race and even in some areas have growth exceeding London.

It does make me wonder though if this is all sustainable. I remember getting my first mortgage and a nervous man at Halifax allowed us a mortgage at 4 times our annual salary – now in some areas today the average house price is 12 times average earnings with a national average of 6.3.

If you step back and think about it, the North ultimately has cheaper houses and is therefore more affordable so as people seek financing will be swayed to these areas – and therefore increasing prices – one big vicious circle!

It then comes back around to the number of houses available. Supply and demand has always shown that where there is demand, the supply will be able to increase the cost. Britain has a chronic shortage of housing stock but in 2014 less than half the required number of homes was actually built (Department for Communities and Local Government shows 118,770 against a target of 250,000). This simply is putting pressure on the supply.

So what should you do as a potential buyer, like always shop around. I recently had a conversation with a seller who was amazed at how much the price had been chipped away on their property for sale, only when he told me that they had informed the potential buyer how desperate they were to move did it click – if you are selling be careful what you say! Buyers are in a good position (if you can find the right property). At present Banks and other lenders are frantically undercutting each other to get your business, though they are still not lending silly amounts – which does mean you need to carefully consider deposits, home buy or the location of where you settle.

So those people in the North that are thinking of selling should be cautious, with house prices forecast to increase you may want to hold out a little longer. For those looking to buy, now is your time but be wary about the price you are paying – getting a second opinion!

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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