North-South house price divide: turning into a chasm?

With the cost of homes in London soaring as rich overseas buyers 'colonise' the capital, some of the hidden effects are revealed

The North-South property divide has seemingly been in place forever and a day. The gap varies over time – closing a little as the northern metropolitan cities play catch up and then widening again as the South emerges first from one of the UK's periodic recessions.

But is something very different going on this time around? Are house prices in London and parts of the South-east racing so far ahead that the North-South divide circa 2013 is about to turn into a permanent and economically damaging chasm?

On all the measures that count what is going on in the London market is completely without precedent. Last month property watchers in the capital gave a collective whistle when Rightmove announced that asking prices in Hammersmith and Fulham, hardly a bargain basement local, increased by 10 per cent in just four weeks. Annual double-digit property price inflation within the M25, and increasingly outside it, is becoming the expected and all this is happening off the back of an economy which is stumbling out of recession, rather than a boom. This has happened before of course, in the late 1980s and from the early 2000s most notably, but only when the economy has been growing above trend.

Henry Pryor, a former estate agent and now noted property market commentator, says the key factor is the plethora of cash buyers: "I have calculated that in the first half of this year 54 per cent of property purchasers in London were cash buyers. This means there is no chance for first-time buyers and anyone who has to sell their home before buying another – the normal way we do things in this country – might as well stay at home, they can forget it." Foreign buyers are behind this. Peter Mackie, a senior partner at the independent buying agents Property Vision, sums it up: "An ever-increasing variety of nationalities viewing London as their home for business and educational reasons appear to replace those domestic owners who are bowing out."

In effect, that is an elegant way of saying that in ever larger areas of the capital Britons are cashing in by selling to foreign buyers, and this in turn is pushing up prices in the areas they are moving to. The capital of the country that gave you the empire that the sun never set on is being colonised by wealthy elites from overseas.

For the first time there is almost a complete divorce between house prices and the "real"' economy. It is the cash flowing in from overseas that counts.But as Mr Pryor observes, the UK property market is "a patchwork quilt, you can see huge variety in market conditions from one parish to the next." London and increasingly the capital's overspill areas are not the UK property market: "Of the 840,000 homes currently on the market fewer than 200,000 will be sold by Christmas – 640,000 will still be up for sale, a third of homes have had their house prices reduced more than once," he says.

In much of Wales and Northern Ireland the market is still deeply depressed. Some parts of Scotland and the big northern metropolitan centres are seeing transactions up – still barely half 2007 levels – and some limited price rises. Nicholas Ayre, the managing director of homebuying agency Home Fusion, says: "We are starting to see house price growth in other parts of the country. This will balance things out a bit but it will never be anything like the growth in the capital. Demand for property is much greater there." But others are less sanguine about the price chasm and its economic effects, suggesting a potential brain drain from the capital.

"We could see increasing numbers of highly skilled people leaving London because they can no longer afford to live here and this will surely have an impact, particularly in the public sector," says James Hyman, the head of residential agency at Cluttons. Whereas Mr Pryor points out the property market in the North and West, while moribund in the main, at least reflects economic reality. "There are still property chains in these areas which you aren't seeing in parts of the capital because of the huge number of cash buyers.

"People can move around for work and don't face the stark reality of once selling having to move completely out of the area they live in." So the North-South divide story circa 2013 is very different – and although the South is cashing in, it may also be losing out.

Start your day with The Independent, sign up for daily news emails
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
News
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
news
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before