House prices rocket by over 90%

by Christina Jordan on 03 February 2011  |  13 comments
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Despite the global recession the last decade has still seen UK house prices boom.

After years of booming property prices the great British public were brought back down to earth with the credit crunch in late 2007 and subsequent recession.

Against popular belief property prices proved that they could indeed fall. And fall they did. Between the peak of the market in the third quarter of 2007, when they hit £199,766 (according to Halifax) and the trough in the second quarter of 2009, when they fell to £157,767, they had plunged by a massive 21%.

This simultaneously scared homeowners, who had long been smugly counting their ‘equity pennies’, and thrilled wannabe first-time buyers who finally saw a chance that they might, just might, be able to get onto the housing ladder.

But even given the turmoil of the last few years it turns out that the inexorable rise in property prices is simply unstoppable. The market has stabilised since 2009 and average UK prices have risen by a decent 4% since, ending 2010 at £164,310.

This marks a whopping 91% rise (£78,000) in average UK property prices in the last decade, from £86,095 in 2000. Even with the worst post-war global financial crisis thrown in!

It’s little wonder that Brits are like bees to honey when it comes to property – drawn in by the sweet temptation of equity riches.

Indeed, over the lifetime of a mortgage (usually 25 years) property has historically performed extremely well. In the last quarter of 1985 average UK prices were £37,259, according to Halifax. By the end of 2010 they had increased by a whopping 440%.

North/South divide

The Halifax research highlights another interesting trend, as well as spiralling prices. There has long been a North/South property divide but in the noughties it actually narrowed, as price booms in the North of the country meant it started to play catch up.

House price growth in the Northern regions averaged 102% in the last decade compared with 75% in the South. As a result, the average house price in the regions across the South (£206,091) is now 56% higher than in the North (£132,163). It’s still a massive gap but 10 years ago prices in the South were, on average 80% higher than in the North.

The North’s dominance can be seen in the table below. Indeed, the six regions with the highest house price growth since 2000 are all outside the south of England.

Greater London (63%) and the South East (75%) saw the smallest price gains over the decade.

Regional house prices in the noughties

Source: Halifax

When you drill down to a more local level, the results are even more interesting, and quite surprising.

Penzance in Cornwall recorded the biggest increase in house prices among UK towns during the last decade, with the average house price in the town increasing by 193% from £70,171 in late 2000 to £205,532 at the end of 2010.

A massive 167 (50%) of the UK towns surveyed recorded at least a doubling in house prices over the past 10 years, and eight of the 20 towns that delivered the largest gains are in Scotland.

In fact, only four out of the 20 towns with the largest prices gains were in the South, and they were all in the South West.

Top 20 towns and cities in the noughties

Source: Halifax

Time to buy?

Of course, it’s not all about the amount of equity you gain in your property, and any home is only worth what someone is willing to pay for it at the time you want to sell. Plus the averages are just that. The UK property market works on a much more local level that even town and city averages.

More importantly, there are many other perks to homeownership, from the freedom to paint the walls the colour you want, not the colour your landlord chooses, to the increased security that many perceive owner-occupation to offer.

Throw in the fact that in many parts of the country servicing a mortgage is cheaper each month than paying rent and it’s no wonder that our fascination with homeownership never seems to wane.

Thankfully the mortgage market is slowly repairing itself and lenders and homebuilders are increasingly targeting first-time buyers with schemes to give you a helping hand onto the ladder. It’s by no means easy and large deposits are still required but the market is moving in the right direction. And that’s definitely a good sign.

If you think now might be a good time to make that all-important first step onto the housing ladder, but you don’t know where to start, why not contact an independent lovemoney.com mortgage adviser now. They are free, they are fully qualified and authorised to give personal advice and they will help you search the market for a deal that really meets your needs.

More: Find a competitive mortgage | How to buy a property at auction |The mortgage to kickstart the housing market

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