UK Finance: The end of the North South divide?

Warren Lewis
23rd May 2018
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"The once untouchable market has become a victim of its own extraordinary success"

The latest data and analysis from UK Finance has revealed that as well as the highly publicised slide in house prices in the capital, FTB and homemover mortgages were also down in Q1. However, it wasn't all bad news for London as remortgage activity was at its highest since 2008.

According to the figures, there were 9,800 new first-time buyer mortgages completed in London in the first quarter of 2018, a drop of 3% against the same quarter a year earlier. The £2.8bn of new lending was the same year-on-year. UK Finance calculated that the average first-time buyer in the capital is 31 and has a gross household income of £66,000.

There were 6,600 new homemover mortgages completed in London in the first three months of 2018, some 4.3% fewer than in the same quarter of 2017. The £2.68bn of new lending in the quarter was 1.5% down year-on-year. The average homemover in the capital is 37 and has a gross household income of £90,000.

There were 15,300 new homeowner remortgages in London completed in the first quarter, some 4.1%more than in the same period a year earlier. The £4.67bn of remortgaging in the first quarter was 7.6% more year-on-year.

As ever, the property industry was quick to react to the report and here's what they're saying:

Russell Quirk, founder and CEO of, commented: “Much like the marginal monthly decline in price growth, there’s nothing to see here where the health of the overall market is concerned.

While other industry sources are reporting a much more erratic market landscape on the surface, beneath it all the steadier hand of actual sales completions is showing a fairly static and subdued outlook. This is almost certainly because of the current disparity between the expected price of UK home sellers and the price home buyers are willing to pay, as dictated by the market itself.

Until expectations on both sides are more closely aligned, it’s likely we will see further unpredictable spikes and dips where mortgage and asking price data is concerned, and a slow but steady consistency when looking at actual property sales.”

Jonathan Samuels, CEO of Octane Capital, said: "For annual growth in London to be the lowest since 2009 underlines the extent of the capital's fall from grace.

The once untouchable market has become a victim of its own extraordinary success. While prices will never collapse in the capital, because of demand and the sheer lack of supply, it's now the turn of the regions to play catch-up. We're starting to see a fundamental rebalancing of the housing market, as property investors and homebuyers look for value further afield.

With remote and flexible working become more widespread by the day, the dynamic of the UK property market is shifting irreversibly. The broader property market narrative continues to be one of low single digit growth.

Low stock levels and continued cheap borrowing rates are preventing prices from falling while economic weakness and political uncertainty ahead of Brexit are seeing many households err on the side of caution.

For the rest of 2018 and perhaps well into next year, the property market will likely mirror the economy, lacking any real momentum and simply idling along."

Sam Mitchell, CEO, online estate agents, had this to say: "For years we have talked about the north south divide, with house prices in the north struggling to keep pace with booming price growth in the south. But that trend has been turned on its head.

Compare London to Liverpool. While London house prices are in negative growth territory, in Liverpool, average prices are up 12.5% over the same period, making it one of the strongest property markets in the UK right now. Where affordability has been a major problem in the south of England, the north offer value, particularly for families looking for larger homes.

And with an improving transport network to the north of England and thriving regional business hubs in large cities such as Manchester and Liverpool, we can expect to see far more people heading north.

As for the general property landscape, buyer demand is holding up, particularly the first-time buyer end of the market. First time buyers are benefiting not just from the stamp duty freeze but also less competition from buy-to-let investors. But transaction levels generally are struggling to pick up,and the Spring period hasn't seen the typical rush of purchases that we would normally expect.

This is partly down to Brexit uncertainty and low stock levels, but it's also a result of a buyers pushing hard on price and sellers holding out, rather than caving in and feeling pressurised to drop their prices. It does feel like we have a stand-off between buyers and sellers at the moment, particularly in London.

There are still deals being made, and the successful sellers are prepared to negotiate. Also, sellers who are on the ball are watching the market, looking at what is selling or not selling in their area, and adjusting their expectations and prices accordingly to attract buyers."

Lucy Pendleton, founder director of independent London estate agents James Pendleton, said: “London hasn't got its head in its hands. In fact the capital is ahead of the game in making much needed adjustments to maintain demand and that’s no bad thing in the long term.

Affordability problems have been driving down sales volumes and these remain subdued. They fell massively according to last month’s bulletin and are still sliding heavily on an annual basis, down 12% in England at the last count. Nationally, buyers and sellers are going to have to make up their minds pretty soon which way the market needs to move. When that happens, the capital will be seen to have led the pack as it typically always does.

Outside London, only the North East is being buffeted by inflation. Prices being achieved across the rest of the country still betray a housing market in relatively rude health. Looking at the numbers it’s less a case of a two-speed housing market, and more a case of pick any speed you like.

The regions are showing growth across the spectrum and this is now a persistent trend, which is striking as London contracts.

New builds are still seeing the biggest annual rises because of first-time buyer tax breaks and incentives which could be driving some of this mixed picture and we could finally be seeing some diversification away from London. The only problem with that is that it tends to happen as people spot the value in ‘down-pricing’ rather than down-sizing by moving into different areas and, as with everything else, this shift is cyclical and unlikely to last for long.”

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