The north-south divide in house prices has widened, as London’s growth has moved back into double figures, according to recent data from Nationwide.
The latest quarterly figures from the building society show that across the UK, the average house price increased by 1% in the third quarter (Q3) of 2015 and rose by 3.7% annually to reach £195,733.
Nationwide’s statistics are based on mortgages it arranged between July and September. The figures highlight a significant difference in price growth and average prices around the country.
London House Price Growth Back in Double Figures
London has seen the strongest housing market recovery in recent years and its annual rate of increase has returned to double figures, up from 7.3% to 10.6%.
As a result, the gap between house prices in the capital and the rest of the UK is at its widest yet. The typical property price in London, £443,399, is more than three and a half times the average of £124,345 recorded in the north of England.
London’s surrounding area has also experienced strong growth, with an annual price rise of 9.5% in the commuter belt outside the capital. Prices in this area average £326,785.
The growing divide in house prices mirrors the Land Registry’s latest report for completed sales in August. It reveals that prices in London increased by 1.7% over the month, whereas in the North West, they dropped by almost as much.
However, the data shows that the greatest annual growth was experienced in the cheapest parts of the capital, indicating that buyers are unable or unwilling to afford some areas.
Nationwide’s figures suggest that Northern Ireland is seeing the highest yearly price growth, after recording a 6.5% increase since last year. However, at an average of £127,562, they are still 44% below their pre-recession peak.
Prices rose by 6% in England, to £239,842, by 1.9% in Wales, to £146,854 and Scotland saw a 1.3% decline, taking prices down to £140,402.
Regionally, prices vary hugely. In eight areas, a slowdown in the annual pace of growth was recorded, while five regions experienced acceleration.
Nationwide has also released its latest monthly index, which shows a 0.5% price rise in September and an annual growth rate of 3.8%.
Chief Economist at the building society, Robert Gardner, says there are signs that growth is hitting more ordinary levels across the UK.
He continues: “The data in recent months provides some encouragement that the pace of house price increases may be stabilising close to the pace of earnings growth.
“However, the risk remains that construction activity will lag behind strengthening demand, putting upward pressure on house prices and eventually reducing affordability.”1
Chief UK Economist at IHS Global Insight, Howard Archer, expects house prices to rise by 7% this year.
He explains: “We expect house prices to see solid increases over the coming months amid firm activity.
“Given that house prices were soft in the latter months of 2014, this is likely to see annual house price inflation on the Nationwide’s measure move higher over the coming months.”1
He adds that a shortage of homes on the market could fuel higher growth.