Further evidence has emerged today of a growing, north / south divide in house prices.
Ever since the last housing crash following the financial crisis, the personal finance pages have been awash with stories about booming house prices. However, for many people living in the North of the UK the picture of soaring prices and a vibrant property market has been a mystery and evidence has emerged of a widening gap between house prices in the North and the South of the country.
In figures released today, the Land Registry has shown that house prices in the East and South East of England have risen by 8.4% and 7.6% respectively. But at the same time, prices in three areas, Wales, The North East and the North West increased by less than 1%.
Earlier in the year house prices also fell in four other regions, including Yorkshire and the East Midlands.
Average house prices
The value of the average home highlights the widening gap between different parts of England and Wales.
Land Registry figures show that the average house price in London, where prices rose by 1.7% in August alone, is nearly £500,000. At the other end of the scale the average property price in the North West of England is just £100,943.
Buy to Let warning
The Land Registry figures come hot on the heels of a warning by the Bank of England that the Buy to Let market has the potential to “amplify” boom and bust in the housing market and cause instability in the wider economy.
Since the financial crisis of 2008 Buy to Let lending has increased by a staggering 40%, compared to a rise of 2% among owner occupiers.
Speaking last week the Bank’s Financial Stability Committee said: “The FPC is alert to the rapid growth of the market and potential developments in underwriting standards.”
“As the market continues to grow, particularly if driven by loosening of underwriting standards, the sector could pose risks to broader financial stability, both through credit risk to banks and the amplification of movements in the housing market.”
“Any increase in buy-to-let activity in an upswing could add further pressure to house prices. This could prompt owner-occupier buyers to take on even larger loans, thereby increasing overall risks to financial stability.”
Many experts are also concerned that changes announced by the Government in the Budget immediately following the election could force Buy to Let investors to sell off property, causing a short term dip in house prices.
Although other experts are equally concerned that the introduction of Pension Freedom, which allows anyone over the age of 55 unrestricted access to their pension, could cause the market to overheat as investors look to indulge their desire to invest in property.