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Dominik Lipnicki: The north/south housing divide

Dominik Lipnicki MM blog

The average price of a house has always decreased as consistently as the temperature the further north you travel in this country.

It is one of the key definitions of our north-south divide and mortgage brokers are perhaps more familiar than anyone else with the stark variations in prices of very similar houses from region to region.

Nevertheless, the release of this month’s annual house price statistics from the Land Registry still had me gasping in disbelief. The gulf between average house prices in our major cities across the country is staggering and the gap between average house prices in London and pretty much everywhere else is particularly telling.

We are talking about a whole different economy in the capital, with average prices in Greater London up 9.3 per cent compared with a 0.5 per cent fall in the north and a 14.6 per cent fall in Northern Ireland.

This means the job of a mortgage broker also varies widely depending on your patch. For example, there are very different challenges to face in the north-eastern town of Hartlepool, where annual prices are down 9.5 per cent compared with the London borough of Kensington and Chelsea, where prices are up a no less than 20.2 per cent.

Many clients, particularly in the north, are simply stuck. Unable to sell, move or even re-mortgage, they are in a vicious cycle of a stagnant market and tumbling house prices.

It does not help that valuers in these areas also tend to be pessimistic when valuing a property for the lender.

For mortgage brokers in the region this means mortgages often fall away after the groundwork has already been done. If the property in question is a new build flat the problem is exacerbated even further as lenders want to limit their exposure and only lend to a percentage of the flats in a single development. It is extremely challenging for brokers who need to break the news to their clients that their property is worth 20 per cent less that they thought.

With falling prices in areas like Hartlepool, County Durham and Blackpool more and more people are simply walking away from their debt, leading to repossessions and further dips in house prices.

However, local brokers are still able to turn around a good proportion of mortgage leads now that so many of their counterparts are leaving the industry or heading down south for an easier ride.

The same can not be said for many places in Scotland and Northern Ireland. Some districts have taken such a hammering in terms of house prices that many brokerages – including my own – have relocated brokers from these areas.

Of course, it is not all rosy in the south for brokers as more and more competition heads down the country to compete for the same leads. And brokers are not the only ones. As more people migrate to London and the surrounding areas to take advantage of better economic and employment prospects, the supply and demand ratio pushes housing prices up even further.

Average rents are at a record high in London. This does mean that brokers can stack up the client numbers in the buy to let market, which is proving a great investment.

The Government could do much to help our clients and get more fluidity in the market by setting up regional stamp duty breaks or state-backed mortgage indemnity guarantees not just for new-build properties but for whole regions.

Dominik Lipnicki is director of Your Mortgage Decisions

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