It’s decidedly grim down south, as a North/South house price divide leaves southerners struggling. In the south, prices are on their way down, with London seeing prices fall 1% over the previous 12 months. By contrast, prices are still on the up in the North, with Scotland posting a rise of 1.7% over the year.
This owes a huge amount to house prices and mortgage rates. In the south, prices tend to be higher, and mortgages larger, so higher mortgage rates have taken a bigger toll on affordability. More people are priced out of the market, so demand has fallen, and house prices have dropped.
Given that first-time buyers make up a third of buyers, the relative affordability compared to rentals is also key. Overall, it’s now cheaper to rent than to buy the same property and pay a mortgage on it. However, in the north it’s still cheaper to buy, which has helped boost property prices. While mortgage rates remain higher, the geographical divide is likely to endure.
We shouldn’t rush to overstate the case though. The property market isn’t booming in the north either. It’s just marginally less depressing than elsewhere. Across the UK, demand is down a third from the five-year average, and sales in 2023 are expected to be around 1 million – their lowest for more than a decade.
For more positive news, we’ll need to wait for significant movements in the mortgage market. As wages rise relative to property prices, we know that once mortgage rates go low enough, we should see affordability to start to work its magic on the market again.
The problem is that predicting exactly how low rates need to go, and when they’ll get there is a tricky business. Zoopla is holding out hope for a tipping point in the first half of the year, but there are no guarantees.
Sarah Coles is head of personal finance at Hargreaves Lansdown:
