Regional UK house prices

In the past decade there has been a divergence between house prices in different parts of the UK. In particular, house prices in London and surrounding areas has rocketed to unprecedented levels.

Source: ONS

According to the ONS, average mix-adjusted house prices in September 2015 stood at £299,000 in England, £175,000 in Wales, £199,000 in Scotland and £162,000 in Northern Ireland.

Most expensive region

The most expensive region is unexpectedly London – with average house price standing at £531,000

Cheapest region

North East had the lowest average house price at £158,000.

House price to earnings ratio

Part of the difference between house prices is the greater availability of jobs in London. London salaries are higher than the national average. However, the difference in house prices is only partially caused by differences in wages. This shows that there are large differences in the ratio of house price to income ratios for first time buyers in different regions.

London stands out with a record house price to income ratio of 9.6 – nearly three times that of Scotland and the north.

Changes in regional house prices

It is interesting that in mid-1990s, regional house prices converge with house price to income ratios falling below 3.0 in all regions. But, since the mid-1990s, the gap has widened. It is fair to say house prices are more volatile in London and the South West than elsewhere.

Reasons for house price differences

Limited supply in London and south. Simple economics suggests that if demand is greater than supply, prices will rise. London and the south are seeing a rise in population, a rise in demand for housing, yet supply cannot keep up – pushing prices higher. In the north, Scotland and Wales, there is less population growth and the pressures on housing are much less.

Difference in population growth rates. The population of London is growing faster than elsewhere.

Speculation and buy to let. Rising house prices in the south has attracted buy to let investors – foreign investors looking to benefit from rising asset prices. It is a self-perpetuating circle with rising house prices encouraging further demand.

Regional cost of renting

The most expensive places to rent in UK

Source: ONS Housing Summary 2017

See also

• London housing market – boom or bust?
• Factors affecting house prices
• Housing market stats