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Understanding house prices at a local level

Posted on 19 December 2018 by Robert Wishart, Senior Researcher .

Recent slowdowns in house price growth, coupled with the Bank of England governor, Mark Carney, warning that house prices could fall by as much as 35% in the three years following Brexit, may leave many homeowners with a distinct feeling of unease. Yet renters, many of whom may see this as their best chance of getting onto the housing ladder, still face significant barriers.

Recent research from the Resolution Foundation suggests that half of young people would not manage to buy their own home before their 40s, with as many as a third facing the prospect of “renting from cradle to grave”. The lack of affordable housing, particularly in London and the South East, presents significant challenges to the renters of today.

Yet even within regions where house prices are high, there are small pockets where housing is much more affordable.  NatCen’s Income and House Prices report explores how house prices vary at the local level.  It reveals some startling trends.

Although house price increases have been well documented, inequality in house prices are not. Between 1996 and 2016, areas with the most expensive house prices, and an average population of 1,500 people, rose by 649%.  Over the same twenty-year period, house prices in the areas with the least expensive house prices in 1996 grew by 302%.

The comparative returns on buying a house in these areas explains why inequality amongst homeowners has been rising, which is particularly evident in London where both the value and dispersion of house prices has risen in the last twenty years.

And even within London’s local authorities, house prices can vary substantially between one street and the next. Haringey, the most unequal local authority in the country in terms of house prices is a prime example. In 2016, the most expensive area within Haringey had an average house price of £4.8 million, more than 28 times the average house price in the least expensive area within Haringey.

However, substantial house price inequality is not merely confined to the capital. In County Durham the most expensive small areas have houses 18 times more expensive than the poorest. Similarly high levels of house price inequality were also seen in parts of Liverpool, Bradford and Cheshire.

Clearly then, policymakers have a substantial challenge ahead of them. A one size fits all approach may be ineffective at tackling rising house prices and shortages in the housing stock. A more nuanced approach, accounting for both between and within area inequalities is therefore necessary.

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