The last four years have been nothing short of a rollercoaster for the UK housing market, fueled by a global pandemic, shifts in working habits, and significant economic pressures. From dramatic rises to unexpected stability and stark declines, the trajectory of house prices has varied wildly across the country. Here’s a comprehensive look at how different regions have fared since the onset of Covid-19.
A Race for Space
During the chaos of Covid-19 and subsequent lockdowns, the UK housing market experienced an unexpected boom. This period, often referred to as the “race for space,” saw a significant rise in demand for larger homes as more people began working remotely. This shift was further amplified by a stamp duty holiday and historically low mortgage rates, creating an ideal environment for the housing market to thrive. Remarkably, between March 2020 and September 2022, the average UK property value soared by over 24%, according to Land Registry data.
Inflation and Interest Rates
However, the situation began to change as double-digit inflation prompted a sharp increase in interest rates, reaching heights unseen since the 2008 financial crisis. Mortgage rates escalated from the lows of one or two percent to a more daunting five or six percent. Contrary to expectations of a market crash, house prices surprisingly plateaued rather than plummeted. From September 2022 to February 2024, the average home price experienced a modest decline of 2.85%, with the average property price reducing from £288,901 to £280,660.
Winners and Losers
Not all areas have followed the national trend. Some regions have witnessed significant surges in property prices, while others have seen declines. Thanks to detailed analysis by Hamptons, a clearer picture emerges of which areas have thrived and which have not.
The North Leads the Way
The standout performer has been Rossendale in Lancashire, where average house prices have rocketed by 48% since March 2020. Close behind are Blaenau Gwent in Wales and the Orkney Islands in Scotland, with price increases of 41% and 40% respectively. The North West of England, particularly areas around Manchester and Liverpool, has also seen robust growth. This region’s popularity is partly due to its affordability relative to the South, coupled with significant investment, including government funds aimed at “levelling up” less prosperous areas.
London’s Diminishing Appeal
On the flip side, London’s prime boroughs like Kensington and Chelsea, along with Camden, have experienced the steepest declines. Despite initial increases, these areas have faced reductions of up to 22% from their peak prices. Factors such as reduced foreign buyer demand and the shift away from urban living have contributed to this downturn.
Economic Factors and Future Outlook
The variances in house price performance can also be attributed to broader economic factors, including the stamp duty implications, which have disproportionately affected higher-priced properties, particularly in London. The ongoing preference for more affordable, rural, or semi-urban areas suggests a continued trend towards remote working, potentially dampening the demand for urban living spaces.