The average house price in the UK is currently £295,000. However, if you have ever looked to invest in property across the UK, you would have noticed that the average property price differs hugely between areas of the country. Similar properties in different towns and cities have vastly different prices.
The impact of a region on property prices can be explained simply with a supply and demand model. The more desirable a place to live, be it from better employment prospects, leisure options or transport infrastructure, the more expensive the property becomes. Similarly, if the number of available properties is limited, with high demand, the price will also rise. This causes property price variation not only between the nations of the UK, but also between regions and cities. In fact, differences in property prices will even occur between streets in a city, depending on the desirability.
What’s more, if you have ever followed property prices trends in the UK, you would have noticed you get different information, depending on where you look. One news outlet may claim house prices have risen over the past year, while another may claim a fall in property prices in the same period. This is because there are several different sources of UK property prices and as they use different data and methods, comparing them may provide contradicting trends. Information on property price trends, known as house price indices, are published by private organisations such as Nationwide, Halifax and Rightmove. In this article, for consistency and accuracy, all information is sourced from the UK House Price Index (UK HPI), a joint public operation from the HM Land Registry and Offices for National Statistics.
Property Prices Across the UK
As mentioned, the average price for a property across the whole of the UK is £294,910, according to the UK House Price Index, using the most recent published data (November 2022). However, looking closer at the different countries, there are large differences. England has the highest average house price at £315,000. This is followed by Wales (£220,000), Scotland (£191,000) and Northern Ireland (£176,000).
These differences continue across the regions of England. London has the highest average property price, £542,311, while the South East (£402,466), East of England (£365,144) and South West (£337,144) also have high average prices. Prices decrease on travelling further North, with the Midlands averaging £255,218 and Yorkshire and The Humber at £212,329. The lowest property prices in the UK are in the North West and East, averaging £221,224 and £162,596, respectively. Within regions, the average values will vary further, as the towns and cities often have higher prices than the rural areas, due to improved facilities and infrastructure.
Are Property Prices Increasing?
Over the year covering November 2021 to November 2022, average house prices in the UK increased by 10.3%. This corresponds to an additional £28,000 on a property. In fact, consistent increases since 2021 have resulted in current prices being a record high. These property price increases are consistent across England (10.9%), Wales (10.7%) and Northern Ireland (10.7%), while Scotland (5.5%) prices are increasing at a slightly slower rate. The HM Land Registry offers an interactive view on UK house prices, across selectable periods and regions. While throughout the year there are seasonal variations, for example the lead up to Christmas often shows reduced growth, the initial data for January 2023 shows strong continuation of average property price growth.
Different areas of the UK are also showing to be growth hotspots, especially in places undergoing significant development. Many cities and towns in England are showing property increases above their regions average, and represent ideal opportunities for buy-to-let investors. Northern cities such as Manchester, Liverpool, Sheffield and Newcastle are demonstrating enviable growth. New regeneration projects are increasing the attraction to new residents, moving to the city to live, work and do business, whilst also having a strong student rental market. These factors are increasing the demand for housing and causing house prices to rise. The lower costs of these Northern cities also offers more options for property investments.
What Happened to the Property Market in 2022?
Across 2022, the property price growth in the UK remained reasonably constant at just over 10%. In addition, trends in 2022 were much more stable than previous years. The introduction of Stamp Duty savings throughout previous years caused property prices to show sharp periods of increase and decline, around the introduction and deadline dates of the tax relief.
Different areas of the UK showed variation in their average house prices throughout 2022. While Scottish property prices showed the slowest rise, there were many regions in England showing fast growth. The North West was the region with the greatest growth, with a 13.5% house price increase in a year. This is bolstered by the increased desirability of cities including Liverpool and Manchester, which are attractive options for property investments due to their strong market. Similarly, the increase in desirability of Birmingham is pulling up the average house prices in the West Midlands, with the second highest national increase. Birmingham’s emerging business landscape, dubbed the ‘next London’, and a worldwide advert following hosting the Commonwealth games is increasing property demand in the region.
Are Property Prices going to drop in 2023?
Forecasting from the trends across 2022, average property prices can be expected to continue steady growth in 2022 across the UK. Initial data for January is promising and reinforces this. Exact predictions are difficult to ascertain, especially following the economic uncertainty introduced by the UK government in late 2022. For this reason, Tom Bill, the head of UK residential research at Knight Frank has stated “The first rule for anyone predicting the trajectory of house prices in 2023 should be to ignore any data from the chaotic final quarter of 2022”.
Summary
Following chaotic patterns during the pandemic, house prices in the UK settled into more steady growth throughout 2022. On average, house prices increased by over 10% in the year prior to November 2022. However, within these national averages, there are towns and cities well above the curve. Increasing desirability for residents and businesses is attracting people to certain areas, and the rising housing demand outstrips current supply. These locations represent hotspots for property investment, and there are many UK towns and cities that offer huge potential for buy-to-let investors.
