Northern Property Market: Surging Past Expectations

Rising House Prices Defy National Trends

The Northern property market remains strong, with a 3% annual house price increase, far outpacing the national average. According to Zoopla’s latest house price index, the UK as a whole experienced a more modest 1.6% rise in house prices in the year to May. Many feared that stamp duty changes in April might cool activity. However, sales agreed in May soared to a four-year high, reflecting a 6% annual increase.

Northern Hotspots Lead the Way: Northern Property Market

Areas across the North of England are witnessing the strongest house price inflation. Additionally, Scotland and the East Midlands are seeing the most vigorous sales activity. Liverpool is among the standout performers and has notched up the fastest house price growth of any major UK city. Impressively, it has registered a 3% uplift. Yet, it’s not just the major cities enjoying the limelight. Outlying towns such as Blackburn, Wigan, and Birkenhead have seen even greater gains, with price increases reaching up to 6%.

Supply and Demand: The Driving Force

The dynamics of the market are, as ever, governed by supply and demand. Zoopla’s data points to a significant swell in properties coming to market in the South of England. The South West now boasts 21% more homes for sale than a year ago, with London and the South East also recording double-digit growth in listings. This surge in availability gives buyers the upper hand and suppresses house price growth in these regions. Consequently, prices in the South East have edged up by just 0.5% over the past year.

Contrast this with the North, where housing stock remains in short supply. The North West saw only a 3% increase in available properties, while Scotland recorded a 5% rise. Scarcity and better affordability have driven up prices in these areas. As a result, the North West saw a 3% rise, and Scotland nearly 3% – both ahead of the national average.

Employment and Affordability Fuel Northern Demand: Northern Property Market

Part of the North’s enduring appeal is its relative affordability compared to the South. As employment opportunities have expanded in northern cities, more buyers are flocking to the region, intensifying competition and underpinning price growth. The combination of fewer homes for sale and a steady stream of buyers ensures the market remains buoyant.

North West: The Nation’s Most Sought-After Market

According to Toby Leek, president of NAEA Propertymark, the North West currently holds the title of the UK’s “most popular housing market.” Even amid economic uncertainty, the market’s vibrancy stands out. In fact, May saw the busiest sales since 2021, and house price inflation remains resilient.

Leek highlights that a continued appetite for homes remains evident, even as broader inflationary pressures persist. The recent decision by the Bank of England to lower interest rates to 4.25% has only enhanced buyer confidence, with many lenders now offering mortgage deals below the 4% mark. This easing of borrowing costs, despite less-than-ideal inflation figures, has further galvanised the market.

The South Stalls as Buyers Await Lower Rates: Northern Property Market

By contrast, pricier regions such as London have seen muted activity. Higher borrowing costs prompt buyers to wait for more favourable conditions. Regions where homes remain affordable attract the most attention when interest rates are elevated, explaining the North’s continued momentum.

Stamp duty changes were expected to dampen demand by drawing more properties into the tax’s scope. However, Zoopla’s analysis reveals that the vast majority of transactions are being driven by home movers – those buying out of necessity rather than speculation.

Northern England: A Magnet for Property Investors

Shifting Focus of Buy-to-Let Investments

Recent research by Hamptons illustrates how buy-to-let investors are increasingly favouring the Midlands and the North. In the first four months of this year, nearly 40% of all new rental property purchases occurred in these regions, up from just over a third in 2022. This shift marks a dramatic change from 2007, when fewer than a quarter of investment properties were bought in these areas.

The growing divergence between North and South in the property investment landscape is stark. Soaring prices and stagnant growth in southern markets have made the North more attractive, offering greater potential returns and “more headroom” for investors. Not only are purchase prices lower, but rental yields in the North are also considerably stronger.

Strong Rental Yields Bolster Investor Returns

According to Hamptons, the North East leads the way for average gross rental yields, achieving an impressive 9.3%. The North West follows closely with 8.2%, while Yorkshire and the Humber, the East Midlands, and the West Midlands all post yields above 7%. These returns provide a crucial buffer for landlords facing higher tax bills, including those stemming from recent changes to stamp duty.

Conclusion: A Market in Transformation

The landscape of the UK housing market is shifting, with the North of England rapidly closing the gap on the South and, in many respects, overtaking it. Scarcity of homes, robust employment growth, and relative affordability continue to attract both home buyers and investors to the North.

Meanwhile, abundant choice and softer price growth in the South mean buyers can afford to bide their time. Economic conditions and policy changes continue to shape the market. As a result, the North’s dominance may persist, offering stability and opportunity.