While Scotland is the most optimistic region in the UK with the most bullish expectations for house prices, London and the South East languish at the bottom of the table according to assertahome.com’s March survey.
- 92% of Scottish househunters expect house prices to rise in their region compared to just 76% of their Southern counterparts.
- Those looking for homes north of the border expect prices to rise 11% by this time next year compared to a gloomy 4.3% in London and the Home Counties.
- Indeed only 22% in the South think house prices will rise more than 10% compared to 55% of Scots and 57% of Yorkshire househunters.
- And it’s not only Scotland, Northern areas of England are also much more bullish than those further South.
Low prices do not explain differences in optimism.
Average house prices in Scotland are less than half those in London and the South East 1. Indeed, all four most optimistic regions (Scotland, Yorksire & Humberside, the North and North West) have the lowest house prices in the UK. Conventional wisdom suggests that the low prices mean property is more affordable, but this ignores income levels which are also lower in northern regions. assertahome.com’s research shows that:
- First-time buyers pay 4.2x their household income in Scotland, the same as they do in London and the South East, so those stepping on the ladder in Scotland find property no more affordable than those in the South.
- Taking all categories of househunter nationwide, all four most bullish regions have by no means the lowest multiples of house prices to income – an average of 4.6x compared to a national average of 4.5x.
To support the statistics, Londoners and South Easterners actually rank affordability of house prices relative to incomes just as low as those north of the border.
- Only 15.5% of each region’s respondents thought house price levels were still affordable relative to incomes, although in each case, low interest rates (meaning low mortgage payments) was the top reason for their optimism on prices.
House Price Momentum Explains the Trend
The four most optimistic regions have experienced the fastest house price inflation over the last 12 months (with the exception of Wales)1. London and the South East has seen the slowest growth in house prices and is the least optimistic.
- Househunters are strongly influenced by the recent performance of house prices in their region.
- As confidence returns to those in the South, house prices can be expected to rise again.
Low Income Households continue to stretch themselves further
- Househunters again raised the bar on how much they are prepared to pay for their new home in March with those in the lowest income bracket looking for a home 7x their household income compared to 6x in March. (see Chart 3).
- Respondents cited low interest rates as the principal reason for optimism that buying now makes sense.
Across the UK, househunters expect house prices to slow from their recent fast growth to 6.2% by this time next year compared to a 12 month forecast of 7.2% in January and 6.9% in February. What’s more confidence has slipped each month too, from 86% of househunters in January expecting prices to rise to 81% in March.
Jim Buckle, Managing Director of assertahome.com said: “Although optimism in continued house price growth is running high across the UK, the further north you go the more bullish househunters become. Our research has shown, however, that low house prices do not explain this optimism because house price to income ratios are broadly consistent across the country. Far more importantly, confidence in house prices is self-perpetuating. Regions which have enjoyed strong growth expect more to come. Slow growth in the south has by contrast subdued confidence there.”
