A new report produced by KPMG and analysing the latest house price projections, has shown that house price growth in the East Midlands could surpass London over the next five years.
The analysis revealed that the house price growth in the East Midlands region was projected to grow at an average of 3.4 per cent over the next 5 years. Meanwhile, the North East and London were projected to grow the least, at 1.9 per cent and 1.5 per cent on average respectively.
Many industry experts believe that average house prices in London are falling for a combination of reasons, including the simple fact that prices in many areas are just too high to be affordable for the average UK buyer and recent stamp duty cuts have little benefit for and therefore little impact on London buyers.
Prices in the Midlands and the North in general are benefitting from high levels of investment and infrastructure improvement; however they remain attractive to property buyers thanks to average prices that remain affordable.
Dr Alla Koblyakova, an expert in real estate finance at Nottingham Trent University, said that the narrowing of the North-South divide in house prices is a natural consequence of government policies on affordable housing and help to buy schemes.
She continued: “These programs target first time buyers and low-to-middle income groups, at the same time establishing different caps on house prices within various locations.
“For example, the starter homes initiative caps prices in London at £450,000, while in other regions this is £250,000.”
Dr Koblyakova adds that Londoners struggle to pass affordability criteria for highly-priced housing stock with the total salary multiplied 3.5 or 4.5 times. In turn mortgage approvals have declined leading to a fall in prices in the South.
Ian Borley, East Midlands senior partner at KPMG, said: “The housing market in the East Midlands reflects the strength of our local economy and the Midlands as a region overall. Our analysis reinforces the importance of local infrastructure and connectivity, with billions being invested to improve roads, rail lines, schools and hospitals in the region, and these continue to be crucial drivers for house price growth.
“A number of towns and cities across the East Midlands are undergoing regeneration, deemed ‘up and coming’, and already these are noting rising house prices. These factors drive perceived attractiveness and ultimately create a virtuous circle of growth. Regional business hubs like Derby, Leicester and Nottingham are benefitting from the exodus of talent leaving London to start a life where the job prospects are good and the cost of living is cheaper.
“Policymakers need to recognise the impact rejuvenation and community can have on making areas attractive. As is evident, eyes should be fixed on the regions as much as on London.”