The property markets in the North of England and Wales would experience substantial declines if the Bank of England (BoE) increases interest rates in the near future, believes an industry expert.
The Director of Home.co.uk, Doug Shephard, announced this warning following the release of the firm’s Asking Price Index, which highlights the widening gap between prices in the north and south of the country.
The index revealed that the average asking price of a home in England and Wales is now £282,744, a 0.4% rise on August and up 6.5% over the year.
The report also states that buyer demand and a lack of supply in London and the South of England are continuing to push up the national average prices across most of the country.
However, it reveals a significant difference between the overall finances of the north and south. While prices in the capital are up by more than 50% over the past five years, they have dropped in the North East over the same period.
The price of a home in Greater London has risen by 12.8%, or £60,000, over the past year.
This is partly caused by the supply of stock continuing to drop, with record lows in August, down 59% since August 2007 and a 10% annual fall.
House price growth in the South East is outperforming even Greater London, rising by 6.1% in the last six months.
Shephard observes: “With prices in London up 53.3% and the North East down 0.4% over the last five years, it is clear that the northern and southern property markets are poles apart.
“We maintain that, in view of such diversity of fortunes across the country, it is near impossible how the BoE can realistically raise interest rates any time soon.
“Property markets in the north and Wales remain very fragile and would suffer significant declines should the cost of borrowing rise, causing negative equity and devastation of mortgage lenders’ balance sheets.”1
The average house price in the North East is now £153,776, a slight increase of 0.4% on August, but down 0.2% on this time last year.
In Yorkshire and the Humber, prices were up by 0.5% monthly and by 0.3% in Scotland.
Prices grew by just 0.1% in the North West, similarly to the West Midlands. In the East Midlands, they were up by 0.2%.
However, in the East of England and the South East, prices increased by 0.9% on the month. In Greater London, they rose by 0.2% and by 0.3% in the South West.