Assetz® News - Still strong at both ends

Still strong at both ends

2nd June 2008 |

One of the recent features of the housing market which those investing in property can hardly have failed to notice has been the geographical variation in prices. While the UK as a whole has seen prices increasing, the highest prices have come in London and the south-east on one hand, plus Scotland and Northern Ireland on the other.

Ulster, as it happens, has now started to see prices fall substantially, which may be attributed in no small part to the downturn in the economy and housing market of the Republic, meaning the price of second homes in the north is no longer subject to the boom generated from the erstwhile Celtic Tiger.

For London and the south-east, the situation is a little more varied, with the capital itself showing a decline in prices that contrasts notably with the neighbouring south-east region. Set against the backdrop of a 0.2 per cent overall drop in prices across England and Wales in April according to the Land Registry figures published last week, London saw prices dip by 0.5 per cent. While that was far from being the worst performance of any region (once again Wales and the midlands did worse), the south-east was the best performing part of the country with a rise of 0.5 per cent.

Today further evidence of a continued positive performance in the south-east region emerged from Smartnewhomes.com, which deals specifically in new-build property. It noted that in April the region accounted for 36 per cent of new homes for sale and saw prices in this segment of the market jump by 1.9 per cent.

Smartnewhomes.com stated that these figures were achieved through a combination of continued demand for larger family homes and a recovery in the popularity of apartments. Reflecting on this, managing director David Bexon said: "Apartments still remain a popular home choice in some regions, as indicated by increased demand and strong prices in the south east."

Mr Bexon went on to suggest that a recovery in the mortgage market and more buyer incentives would help improve what is currently a far from buoyant apartment market in some other parts of the country, such as the oversupplied northern cities. But the fact that apartments in the south seem to be doing better than elsewhere at present may further suggest that this part of the country remains a stronger performer than most.

Of course, the Land Registry figures do not cover Scotland, but the performance of the Scottish market has remained solid, according to the latest Halifax figures, which showed a 0.2 per cent rise in prices in the first quarter of 2008.

The main explanation for this, experts said, was affordability. Fionnuala Earley, Nationwide's chief economist, told Reuters: "Scotland's housing market is in the strongest position in the UK and will be more resilient, mainly because of affordability," a view echoed by Sheemah Shah of Capital Economics, although she said this simply meant a smaller drop in prices over this year and next than in the UK as a whole.

Nonetheless, the view of analysts remains upbeat and was further elaborated on at the weekend by Mark Hordern, spokesman for Glasgow Solicitors Property Centre.

Writing in the Sunday Herald, Mr Hordern explained that the average price-to-income ratio in Scotland is 3.51, compared with 4.05 across the country. Furthermore, he noted, the average Scottish house price has risen more slowly than elsewhere (£85,000 in the last decade against the national average of £130,000).

It was for these reasons, Mr Hordern said, that Scotland was the one region of Britain not to see house prices fall on a year-on-year basis in the slump of 1989 to 1993 and was less prone to a slump now.

Thus while it may no longer be the case that double-digit house price inflation will appear in the northernmost and southernmost parts of the UK, it seems that the strongest markets remain as they were, which in turn could make them the best places to invest ahead of the recovery, however soon that may be.