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House prices have long been a topic of dinner party conversation, and interest in them has no doubt intensified as a barometer of the impact of Brexit. London’s stuttering housing market, in particular, has received a lot of attention. But the recent more sluggish growth of the capital and its neighbours is nothing compared to the increases seen in these cities since the house price crash of 2009.
The last two years have not seen a particular geographical pattern in how house prices have grown. The best performing city for house price growth in this period was Leicester (up 16.7 per cent). Barnsley (up 12.7 per cent) and Wakefield (up 12.2 per cent) in Yorkshire also feature in the top 10.
The map below illustrates the changes in house prices over this time.
There are numerous possible causes for this redistribution in house price growth between cities in different parts of the country. Since April 2016, purchases of second homes have been subject to increased stamp duty; these changes will have squeezed profits in the buy-to-let market.
The data on property transactions shows a significant spike in activity in March 2016 across all cities as investors hurried purchases through before the tax changes. It is plausible that the subsequent drop off in demand from these buyers has dampened price growth in southern cities.
Brexit is also likely to be limiting house price growth; this is a trend that looks set to continue until we know more about the state of the post-Brexit economy. However, if there has been an impact on the market some parts of the country with higher house prices, it doesn’t seem to have had a negative impact in cities such as Barnsley and Wakefield.
That said, while London’s property slowdown has been well publicised since Brexit, it is important to take stock of the longer-term position that homeowners in southern cities are in. Here the picture is very clear.
The map below illustrates the change in mean house prices in cities since 2009 and highlights the stark differences in house price increases between southern and northern cities over this time.
It is evident that the overwhelming majority of the gains in urban property values since the housing market’s 2009 nadir have accrued to homeowners in the South East in particular with significant amounts of housing equity. In London, house prices have grown by 72 per cent over that period, while in Swansea they have grown by only 8.9 per cent.
It is true that the housing market in some southern cities has slowed in the last two years. Oxford, for example, has seen relatively low growth of only 5.3 per cent. But this needs to be seen in the context of the longer-term growth of 69.5 per cent.
It is too soon to say whether the recent geographical distribution of house price increases represents a longer-term trend. If so this will require a new focus in housing policy discussions. However, for now, policy focus needs to remain on housing delivery in the expensive South East to improve affordability and on improving the jobs market in other regions.
You can see more city-by-city data on the Data Tool.
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