House prices are in the midst of a two-year decline – the average home has lost thousands in the past twelve months and is expected to fall by a further £25,000 by the end of 2024.
Rising mortgage costs are largely to blame as they affect millions of homeowners and put pressure on affordability for buyers, who can no longer afford to buy the homes they wanted to own just 18 months ago.
With higher interest rates expected to last even longer, official forecasters from the Office for Budget Responsibility (OBR) predict a further 4.7 per cent will be wiped off house prices next year.
But while most homeowners stand to lose out, some groups across the country have defied cost pressures and seen property prices rise.
If you own a house in Lancashire or the East Midlands, you are likely to be one of the big winners.
Largest increases in average house prices
An in-depth analysis of the latest Office for National Statistics (ONS) data for Money Mail by estate agents Hamptons International shows that house prices have risen by more than 5 percent in more than 30 local authorities in Britain.
To calculate this, Hamptons compared the average price of local government transactions between January and September with the same period in 2022.
Because there are so few transactions each month in some areas, the average transaction price lasted more than nine months. It says this is the most reliable way to measure local government prices.
Here we look at this year’s house price hotspots that have defied the housing crisis – and the homes that have taken the biggest hit.
Increase in seaside resort life
Number one on the house price charts in terms of percentage growth and the only area recording a double-digit increase is East Lothian, which borders Edinburgh.
Houses in the area have risen by 10.3 per cent in the past year, by £30,330 to an average of £323,730.
The area is a popular retreat for coastal living, while offering fast links to the city.
Andrew Smith, country house sales director at Rettie & Co, a local estate agent, says the area is known for its unique microclimate, both in the property market and in terms of weather. While there may be rain over the Scottish capital, a short drive east will often reveal blue skies and warm breezes, he says.
“In a challenging national market, where house prices are stagnating and sales volumes are falling, it is hugely encouraging to see the East Lothian market not only holding up, but also showing a steady increase in sales values,” he says. ‘One of the attractive features of East Lothian is the range of lifestyle options available in the region.
‘From the beaches in the north to the Lammermuir Hills in the south and the rolling farmland and historic villages in between, the region is packed with charm.’
Houses in neighboring Edinburgh have not fared as well, with demand falling due to increased borrowing costs.
However, family homes are still in high demand as supply is tight, says Edward Douglas-Home, head of Scotland Residential at Knight Frank.
And those who can’t find large family homes in Edinburgh are looking further afield to East Lothian.
The second fastest growing area in Britain is the borough of Fylde, Lancashire, just a short distance from the bright lights of Blackpool.
The number of homes in this area has increased by 7.7 per cent in the past year – more than any other local authority in England, with an average of £242,290 between January and September.
‘Many people retire here. One of our largest clientele is people looking to retire on the coast,” she says.
Prime location: Beach life: Both North Berwick and East Lothian, where house prices have defied the slump and risen 10.3% in the past year
Rutland, which borders Leicestershire, Lincolnshire and Northamptonshire, recorded the third biggest growth in house prices, with a gain of 7.6 per cent.
Rutland is popular among those seeking rural, small-town life, with its 50 villages of honey-colored houses. Properties are cheaper than in the nearby Cotswolds and the area attracts fewer crowds.
He adds that it’s a geographical sweet spot: ‘We’re within cycling distance of Oxford and right on the border of the Cotswolds, but you can still get into London. It comes down to quality of life; we have good infrastructure and education is generally good.’
Houses remain almost £110,000 cheaper in West Oxfordshire than in the nearby Cotswolds, at £393,890.
Mr Pike added: ‘Another reason why prices have remained so high is because this is a very high employment area.’
What about the areas hit by the heaviest falls in house prices?
Southern England and Scotland have seen the most dramatic falls in house prices, representing seven of the ten worst performing regions.
Half of the local authority areas with the biggest price falls in Britain were in Scotland, where houses in Aberdeen lost 6.1 per cent, falling by £8,770 to £135,920.
Meanwhile, five of the ten worst falls in England were recorded in London, with homes in the Kensington and Chelsea borough losing as much as 10 percent year-on-year.
Here the average house lost £147,990 in value, to £1,332,890.
Meanwhile, properties in Islington, Wandsworth, Harrow and Camden were all wiped thousands of pounds off their value. Ms Beveridge says this is partly due to northern areas catching up on house prices.
‘About ten years ago the list of top risers would have been dominated by the London boroughs. But the shift underlines that we are in the second phase of the house price cycle,” she says.
‘The house price cycle started in 2008 during the financial crisis, when house prices plummeted. When they started to rise again, it was London that led that recovery, while other regions lagged behind.
‘But we are now in the next phase where price growth is spreading to the other regions, while London is slowing down.
‘And in recent years it has been the areas in Northern England that have experienced the strongest price growth.’
This effect is further reinforced by rising borrowing costs. Because house prices in London are higher, most homeowners require larger mortgage loans and are therefore under greater financial pressure when interest rates rise.
“It is here and in the wider residential community that the shift to higher rates is really hurting,” Ms Beveridge said. ‘Overall, London’s suburbs have fared slightly better than the capital’s center as households look for more affordable areas.’
Estate agent Savills predicts that property values in the capital will fall by 4 per cent by 2024, compared to a fall of just 2.5 per cent in the North-West and East Midlands.
It predicts the trend will continue until 2027, during which time cheaper areas will see the biggest increases in house prices, including Wales and Scotland.
Frances McDonald, research director at the group, says 2028 will “mark the start of a new house price cycle, with house prices in the capital once again leading the way in growth” as the economy improves.
- Additional reporting by Lucy Evans
j.beard@dailymail.co.uk
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