After years of stability, Britain is facing property price mayhem. Prices are starting to seriously wobble in some parts of the country, but storming ahead in others.
Just this week, official figures revealed that in London, once the darling of the housing market, prices are now falling at their fastest rate since the financial crisis of 2008.
Yet up in the North-West, growth is solid at 3.4 per cent.
Meanwhile, regions scattered up and down the country report prices increasing by more than 13 per cent, and falls of nearly 10 per cent.
So how on earth are buyers and sellers supposed to make sense of what is happening?
For most people, buying a house is one of the most important financial decisions they will ever make, which is nerve-racking enough.
Hot or not? House prices are starting to seriously wobble in some parts of the country but storming ahead in others, ONS and Land Registry figures revealed this week
But with political uncertainty around the country’s next Prime Minister, a potential General Election and concerns around how Brexit will play out, buyers are even more rattled than usual and this is impacting prices.
Far fewer sales are going through. And those that do are rarely for the original asking price. Buyers want a discount to recognise the extra risk they are taking in an uncertain market.
There will always be some people who have to sell as a result of what estate agents refer to as the three ‘Ds’ — divorce, death and debt.
But more potential sellers who do not have to move are opting to stay in the hope that prices recover when the country has some certainty regarding its political future.
The ONS house prices data for May showed a stark gap between those places where property prices are rising around the UK and those where they are falling
What is going on in London?
House prices in the capital are falling at their fastest rate in a decade, dropping 4.4 per cent in the year to May.
This is largely because prices have soared more there than in any other part of the country since the 2007-08 financial crisis, which means they have further to fall.
Even with property prices falling, it still typically costs an average of £457,471 to buy a house in London — almost twice the UK average at £229,431.
In fact, it is now so expensive many first-time buyers have given up and are sticking to renting. Even just raising a 5 per cent deposit would require someone to save nearly £23,000.
London house prices are down, according to the ONS, with the small City of London area seeing a 8.3% decline although this is exacerbated by the low level of transactions there
Meanwhile, families have been deterred from moving up the property ladder because of high stamp duty charges.
‘London house prices have hit the bottom’
A leading property analyst said this week that the ONS figures for the annual decline look backwards and London’s property market has already begun to pick back up.
Richard Donnell, research and insight director at Zoopla, said: ‘In late 2018 the proportion of local London markets experiencing annual price falls peaked at 80 per cent and has been steadily declining since this time, over the last three months just 28 per cent of markets registered price falls in London.
‘Average residential values in London are bottoming out for now and we predict sales volumes will slowly start to grow across late 2019 and market fluidity will gradually return.’
New stamp duty rules in 2014 pushed up the cost of moving for anyone buying a house worth more than £937,500.
But even those purchasing properties worth £500,000 — which is not far off the average property price in London — face a £15,000 tax bill.
Our stamp duty calculator shows how expensive some bills could be and works out how much a move would cost you.
London was also once considered the buy-to-let capital. But with the average yield earned by landlords lower as a result of high property prices, it has also been worst hit by a punitive clampdown on landlords’ profits.
Foreign investors are also starting to wonder if London is quite such an attractive destination as it once was — particularly in the present political climate.
However, with the pound falling against the euro and dollar, there may still be bargains for foreign investors.
With political uncertainty around the country’s next Prime Minister (frontrunner Boris Johnson pictured), a potential General Election and concerns around how Brexit will play out, buyers are even more rattled than usual and this is impacting prices
The new property hotspots
All eyes are on the North-West and the Midlands. By region, the North-West recorded the highest annual house price growth at 3.4 per cent in the year to May 2019. Close behind is the West Midlands, where prices increased by 2.7 per cent, according to the Office For National Statistics (ONS).
The North-West has been transformed in recent years, with Liverpool voted European City of Culture and the regeneration of Salford Quays in Manchester.
Meanwhile, the Midlands’ economy has been boosted by big firms such as HSBC opening offices and warehouses in the region.
HS2, the high-speed railway which, it is planned, will connect London to towns in the Midlands and the North, is also helping to boost prices.
In fact, there has already been an exodus from London as families search for more affordable housing, with flexible working and better broadband making it easier for people to work from home.
Despite this, there are some towns and cities elsewhere in the country where house prices have done even better.
ONS figures revealed that in some areas such as West Somerset house prices are shooting up
In England, West Somerset saw prices jump a huge 13.9 per cent over the year to May, while West Devon recorded an 11.1 per cent rise.
Back in the North-West, Craven and Burnley saw prices rise by 10 per cent, and Derbyshire Dales by 9.4 per cent. Halton in Cheshire recorded a 8.3 per cent rise.
Also in the top ten for house price growth were Forest Heath, Suffolk, at 9 per cent, North Devon at 8.7 per cent, Barnsley at 8.3 per cent and Forest of Dean, Gloucestershire, at 8 per cent.
At a country level, Wales saw the largest annual price growth at 3 per cent.
The North-West has been transformed in recent years, with Liverpool voted European City of Culture and the regeneration of Salford Quays (Media City pictured) in Manchester
And the places round the country with slow growth
By country, England recorded the slowest annual price growth, with prices up just 1 per cent in the year to May. Within England, London saw the biggest drop in the prices, followed by the North-East, where prices were down 0.7 per cent year on year.
The area, which has the lowest average house price at £128,000, is also the only English region yet to surpass its pre-economic turndown peak.
Higher than average unemployment rates mean that, despite the cheaper houses on offer, many people in the area still cannot afford to buy.
Enticing people from elsewhere in the country to buy in the area is also difficult with the best-paid jobs tending to be in the South.
On a city and town level, Barnet in North London recorded the biggest drop, with prices down 9.2 per cent, followed by the City of London with an 8.3 per cent decrease.
In fact, of the ten regions with the biggest drop in prices, four were in the Greater London area, including Southwark and Kingston upon Thames.
Also in the bottom ten were Rutland in the East Midlands, where prices were down 7.7 per cent, Mole Valley, Surrey, with a 6.5 per cent drop, Northumberland a 6.4 per cent fall, Windsor and Maidenhead down 6.1 per cent, North Hertfordshire down 5.8 per cent and Pendle, down 5.5 per cent.
London’s property market was storming ahead three years ago, but analysts say buyers are better off now the heat has come out of it
What about buy-to-let?
The buy-to-let bubble has well and truly burst.
In 2015, the Government announced a major clampdown on buy-to-let amid fears that landlords were pushing up property prices for first-time buyers.
Today, anyone buying a property that is not their main home has to pay an extra 3 per cent stamp duty charge — or £14,000 on a £300,000 property.
Unsurprisingly, the hefty new charge has had the desired effect.
When buy-to-let was at its peak in 2007, around 183,000 mortgages were approved to landlords looking to invest in new properties each year.
Now, fewer than 70,000 a year are doled out, according to figures released by UK Finance — the trade association for the UK banking and financial services sector.
Existing owners are also fleeing the market each month after their profits were hit by a series of stringent new tax rules.
The Northern Powerhouse cities of Newcastle (pictured), Liverpool and Hull have all seen strong growth in buy-to-let lending, according to UK Finance
For example, as of 2020/2021 landlords will no longer be able to deduct all the interest they pay on their mortgage from the rental income they declare to the taxman.
They will instead be able to claim a 20 per cent mortgage interest tax credit, but many higher earners may find that they no longer break even.
Landlords can also no longer write off some of their tax bill for ‘wear and tear’ to their property.
The good news is that there are still some opportunities to make money — typically in areas with low property prices and strong demand for rentals.
The Northern Powerhouse cities of Newcastle, Liverpool and Hull have all seen strong growth in buy-to-let lending, according to UK Finance.
Why more families are staying put and renovating
There has been a surge in the number of people opting to improve their existing home instead of moving.
Many of these are growing families who have been put off buying a bigger home by soaring stamp duty bills.
So instead they are adding extra bedrooms with a loft conversion or more living space with a kitchen extension and conservatory.
Others who have put off moving until prices stabilise are looking to smarten up their existing home with a fresh coat of paint or a new bathroom.
Recent figures from John Lewis’ Partnership Card show that spending in DIY stores was up 18 per cent in the first five months of the year compared to the same period in 2017.
People who are remortgaging in order to fund these projects have been helped by low mortgage rates, which mean they can release cash from their homes without increasing their monthly payments by much, if at all.
In fact, the number of borrowers taking money out of their properties by remortgaging is at its highest for more than a decade.
Home improvements are also the second most popular reason for releasing cash with an equity release loan, according to Age Partnership, the Leeds-based retirement specialist.
Experts say that many older homeowners are using the money to convert bathrooms or put in stair lifts so that they can remain in their existing home rather than downsize.
What does the future hold for house prices?
It is widely expected that house prices will continue to wobble for the remainder of this year.
And if we leave the European Union without a deal on October 31, the Treasury-funded Office for Budget Responsibility has warned that prices could fall by up to 10 per cent between the start of this year and 2021.
There are also fears that should mortgage rates increase from current record lows, homeowners may struggle to keep up with repayments or find it harder to buy in the first place.
There is still a market for those who want to buy and sell. Just proceed with caution
Buying agent Henry Pryor
This in turn could see prices fall even further.
But experts say there is no need to panic. Many claim the market is just correcting itself after prices rose too high, making homes in some places unaffordable.
They add that anyone moving house who doesn’t quite get the price they want when they sell, will make a saving on the new home they buy.
It is only those leaving the market and moving into care, for example, who really stand to lose out.
As property expert and buying agent Henry Pryor said: ‘There is still a market for those who want to buy and sell. Just proceed with caution.’