Tortoise or Hare? An analysis of North West property prices

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Overpaying image As we approach spring when the housing market typically starts to wake up from the winter lull, we thought it was a good time to look back over the past decade since the financial crash.

The housing market is generally considered to have experienced a peak in 2007, but how has it weathered the impact of the ensuing crash that sent global financial markets into turmoil?



Average property prices

As Figure 1 shows, UK average property price has increased by just under £27,500 over the past 10 years, taking current prices above the previous peak of 2007. The North West has fared less well with a drop in average price of just over £1,500 for the same period. Being optimistic, this does mean that the North West has at least recovered to the same level as the 2007 peak. This is potentially good news for people who bought around 10 years ago who should hopefully no longer be in a negative equity position (assuming no further borrowing). It is clear from the trend lines that average property price has a more marked increase for the UK as whole.

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Figure 1 - Quarterly average property price based on Nationwide house price index data.

Property Index

House price indices compare the values at different times. For our purposes we have used Q1 2007 as our base point with an index of 100. An index below 100 represents a drop in value, and an index greater that 100 represents an increase in value. The increase or decrease for any given quarter is when compared to the base point.

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Figure 2 - Quarterly property index based on Nationwide house price index data.

The first point worth noting is that the index for the UK and North West was comparable up to around 2009. From 2011, average prices for the UK as a whole grew at a much faster rate than for the North West. From 2010 to 2012, UK average prices remained fairly static whereas North West prices experienced a further decline. UK average prices began a steady growth from 2013 and by the end of 2017 were around 20% more expensive than at the start of 2007. The North West was not such a good result with 2017 prices only being on a par with 2007.

The Future

Obviously we can't predict the future but we can look at very recent data for some hints. Annual house price growth has increased to 3.2% and the month-on-month pace of increase is steady at 0.6%.

The trend in increasing property prices has led to some significant changes in other property related statistics. There has been a marked increase in the number of privately rented properties, up from 13% in 2007 to 20% in 2017. The 35-44 year age group has seen a 126% increase in the number of households renting over the past 10 years. There have also been distinct changes in home ownership when considered in age bandings, as shown in Figure 3.

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Figure 3 - Annual percentage of home ownership by age group based on Ministry of Housing, Communities and Local Government data

There has been a decline in home ownership amongst all age groups except those aged 65 and over. For the most part this decline has been replaced in the private rental sector with social renters remaining fairly static.

The impact of all this obviously depends on individual circumstances and stage on the property-owning journey. It's also worth remembering that these are average figures and any your own position may be better or worse than the average.

If you've been concerned about your ability to remortgage, or are considering how you can make the move from renting to home ownership then we are happy to provide advice and guidance. Our initial consultation is free so it won't cost you anything to get in touch and discuss your options with us.