House prices in UK cities have risen 9.2 per cent since the start of the year, as demand for urban property increases following the end of the Covid-19 pandemic.
In contrast, homes in suburban areas surrounding cities only increased 7.9 percent over the same period, suggesting that the “race for space” outside cities is over, according to Halifax.
The pandemic increased the demand for larger properties outside of central urban areas, with more indoor and outdoor space and better value for money.
Meanwhile, inner-city properties with less space and less surrounding green space fell in popularity with buyers.
Steel City: Sheffield experienced the highest house price growth of any UK city, rising 18.9% between January and September 2022
However, the perceived end of the Covid pandemic seems to have reserved the trend.
Andrew Asaam, Halifax’s director of mortgages, said: “The pandemic transformed the UK property market. Owners wanted larger homes and better access to green space, creating a high demand for larger properties far from urban centers.
“This accelerated home price growth in the suburbs and more rural areas, while it was much slower in the cities.
‘That trend did not completely disappear this year, as home price growth in these areas remained strong. But as everyday life began to return to normal for many, the opportunity to live in cities became more attractive again, increasing demand.
However, he added that the change in economic conditions caused by the cost-of-living crisis was now putting “downward pressure on the housing market in general.”
Sheffield has seen the highest house price inflation this year, with prices rising 18.9 per cent to £228,353, just below the current UK city average of £238,144 according to Halifax.
Looking at the areas surrounding the city, Doncaster saw prices rise by 18.3%, while Bassetlaw saw growth of just 3.4%.
Other big increases for the city included Southampton, where house prices rose 16.2 per cent to £240,459, Leeds, where they rose 13.6 per cent to £226,923 and Edinburgh, where they rose 12.9 per cent. at £276,831.
Jeremy Leaf, a North London estate agent and former RICS Residential Chairman, says: “There is no doubt that the pandemic caused a huge change in many people’s attitudes towards their homes.” The desire to find properties with more space both inside and out resulted in a move often out of the cities to the suburbs and beyond.
“However, as restrictions have been eased and more people have returned to work, the demand to be closer to the center has increased, and with it, housing prices. There seems to be a lot more equilibrium in the market now than a few months ago although of course the recent turmoil in the mortgage market and cost of living pressures may add another twist.’
City vs. suburbs: Halifax data shows price increases in cities compared to surrounding areas
According to the latest Halifax House Price Index, median home values across all UK locations grew by 9.9 per cent in the year to September.
Suburban areas that saw high price growth included Amber Valley in Derbyshire, where prices rose 17.9 percent, and Walsall in the West Midlands, where they rose 16.4 percent.
Chris Druce, Senior Research Analyst at Knight Frank, commented: “Following the economy’s reopening from lockdown, the town and city markets have performed strongly as people recognize the value, conveniences and entertainment what are you offering”.
“Last year, the number of Knight Frank sales in regional towns and cities, as a percentage of all UK sales outside of London, was 40 per cent, up from 38 per cent in 2020.
“So far this year, this has accelerated to 44 per cent of all Knight Frank sales in the UK outside of London.”
House prices in London have grown 6.8 percent since January, well below the city’s national average of 9.2 percent. Homes in and around the capital only saw a 4.6 percent price increase.
While home price growth has held steady so far this year, the rising cost of mortgages and cost-of-living pressures have led experts to speculate that a recession is looming.
HMRC data shows that monthly property transaction levels in September were flat month-on-month, but fell 32 per cent compared to a year earlier.
Leaf added: ‘Nothing reflects the health of the housing market better than the number and pace of transactions rather than more volatile prices.
“Interestingly, the slightly historical nature of these latest figures reflects how activity was beginning to stall even before the traumatic events at the end of September. After the mini-budget it felt like someone turned off the phones in our offices, from which we are only slowly recovering as uncertainty still lingers.
“However, there are many determined to take advantage of better loan terms before rates rise further.”
Last week, the average fixed rate for a two-year fixed mortgage on all securities loans rose to 6.53 percent, the day after new Chancellor Jeremy Hunt revamped much of the government’s tax cut package.
The average rate for five-year fixed deals also rose to 6.36 percent, despite dipping slightly to less than 6.30 percent late last week, according to financial information service Moneyfacts.
The last time the average two-year fixed-rate mortgage hit 6.4 percent or higher was in August 2008, in the aftermath of the global financial meltdown, when it hit 6.94 percent.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their current fixed-rate agreement is coming to an end, or because they have agreed to purchase a home, have been urged to act but not panic..
Banks and building societies continue to lend and mortgages are still being offered and applications accepted.
However, rates are changing rapidly and there is no guarantee that the deals will last and not be replaced by mortgages that charge higher rates.
This is the best Money Mortgage Rate Calculator powered by L&C that can show you offers that match the value of your mortgage and property
What if I need to re-mortgage?
Borrowers should shop around and talk to a mortgage broker and be prepared to act to secure a rate.
Anyone with a fixed-rate agreement ending within the next six to nine months should consider how much it would cost to remortgage now and consider closing a new agreement.
Most mortgage deals allow fees to be added to the loan and are then only charged when you withdraw. By doing this, borrowers can lock in a rate without paying expensive setup fees.
What if I am buying a house?
Those with agreed home purchases should also aim to lock in rates as soon as possible, so they know exactly what their monthly payments will be.
Homebuyers should be careful not to overstretch themselves and be prepared for the possibility of house prices falling from their current high levels, due to higher mortgage rates limiting people’s borrowing capacity.
How to Compare Mortgage Costs
The best way to compare mortgage costs and find the deal that’s right for you is to talk to a good broker.
You can use our best mortgage rate calculator to display offers that match your home value, mortgage size, term, and fixed rate needs.
Keep in mind, however, that rates can change quickly, so the advice is if you need a mortgage, compare rates and then speak to a broker as soon as possible, so they can help you find the right mortgage for you. .
> Consult the best fixed-rate mortgages that you could apply for
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