The average UK property price has declined this year – the Office for National Statistics House Price index is currently showing that values dropped by 0.2% in the year to September and we think the index will end the year posting a total decline of 2.5% for 2023. However, some locations have bucked the trend and seen home values increase.
East Lothian in Scotland topped the table with average house price growth of 10.3%, or £30,330, in the first three quarters of this year compared with the same period in 2022. This aside, the locations that have seen the fastest growth are mostly in the north of England and the Midlands, which are more affordable for buyers and offer landlords higher rental yields. In Fylde, Lancashire, prices rose by 7.7%, or £17,340, while in Rutland, in the East Midlands, values increased by an average of 7.6%, or £27,980.
Indeed, in our list of the top 30 gainers, only three of the local authorities are in the South of England. The City of London saw house prices rise by an average of 6.4%, or £54,300, but price growth here tend to be quite volatile, fluctuating by around 5% each year, because so few sales take place.
What is more, two London boroughs feature in the 10 locations where prices have fallen most in the first three quarters of 2023. Islington has seen values come down by 1.2%, or £8,360, compared to the same period in 2022, while Kensington & Chelsea is at the bottom of the table, having seen prices slide by 10%, or an average of £147,990, to £1.33m, although again a relatively small number of expensive sales means prices are volatile. Elmbridge, Surrey, which is on the border of the capital and, like Kensington & Chelsea, has some of the most expensive homes in the country, is also in the bottom 10, with an average property price fall of 1.4%, or £9,660, to £687,720.
These results underline the fact that we’re now in the second stage of the house price cycle – meaning it’s generally northern areas recording stronger price growth as they play catch up with the South. 10 years ago the top list would have been dominated by London boroughs.
There is one southern area that has bucked the trend, however: West Oxfordshire, where prices rose by 6.5% over the year to September and where the average price has now crossed the £400,000 mark. It seems that here the attraction of rural living, which skyrocketed during Covid, is still strong.
With high interest rates continuing to put pressure on buyers’ mortgage affordability, budget has also become an important factor in house price growth. Aside from the City of London which, as we explained above, is something of an anomaly, West Oxfordshire is the only location in the top 30 gainers to have an average property price above £400,000.
By contrast, the English locations in the bottom 10 list are the pricier parts of London and its expensive surrounding areas – these are the places where households tend to have bigger mortgages relative to incomes so higher rates have put the most downwards pressure on prices. The bottom 10 also features several locations in Scotland and Wales, including the City of Aberdeen (with a fall of 6.1%), the Orkney Islands (-2.5%) and Pembrokeshire (-2.2%). Wales in particular has seen some of the biggest property price increases over the last few years so there has been more scope for froth to come off.
So, which locations are set to be the winners and losers going forward? In our September forecast, we outlined the rationale for a housing market cycle to begin in 2025. Previous cycles suggests that London will lead the way, with prices rising faster than in all the other regions for the first time since 2015.
