House prices in UK cities have risen 9.2 percent since the start of the year as demand for urban property picks up after the end of the Covid-19 pandemic.
By contrast, homes in suburban areas around cities rose only 7.9 percent over the same period, suggesting the “race for space” outside the cities is over, Halifax said.
The pandemic has increased the demand for larger homes outside of central urban areas, with more indoor and outdoor space and better value for money.
Meanwhile, inner-city homes with less space and less greenery nearby fell in popularity with buyers.
Steel City: Sheffield saw the largest house price increase of any UK city between January and September 2022 at 18.9%
However, the perceived end of the Covid pandemic seems to have set the trend aside.
Andrew Asaam, director of mortgages at Halifax, said: ‘The pandemic has changed the UK housing market. Homeowners wanted larger homes and better access to green spaces, fueling the huge demand for larger homes outside urban centers.
‘As a result, house price growth in the suburbs and more rural areas accelerated, while it slowed down much more in the cities.
‘That trend has not completely disappeared this year, as house 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 resulting from the cost of living crisis was now putting downward pressure on the housing market in general.
Sheffield has seen its biggest 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 around the city, Doncaster saw prices rise 18.3 percent, while Bassetlaw grew just 3.4 percent.
Other major cities included Southampton, where house prices rose 16.2 per cent to £240,459, Leeds, where they rose 13.6% to £226,923 and Edinburgh, where they rose 12.9 per cent to £276,831.
Jeremy Leaf, a North London estate agent and former RICS housing chairman, said: “The pandemic has undoubtedly led to a huge change in many people’s attitudes towards their homes. The desire to find homes with more space both inside and out resulted in a move from often outside the cities to the suburbs and beyond.
“But as restrictions have eased and more people have returned to work, the demand to be closer to the center has increased and with it house prices. There seems to be a lot more balance in the market now than a few months ago, although the recent turmoil in the mortgage market and pressure on the cost of living could of course change the course.’
City vs Suburbs: Halifax Data Shows Price Increases in Cities Compared to Surrounding Areas
According to Halifax’s latest house price index, the value of the average home in all locations in the UK grew by 9.9 percent in the year to September.
Suburban areas with high price increases included the Amber Valley in Derbyshire, where prices rose by 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 reopening of the economy after the lockdown, urban and urban markets have performed strongly as people recognize the value, amenities and entertainment they provide.
Last year, as a percentage of all UK sales outside London, Knight Frank’s sales in regional cities were 40 per cent, compared to 38 per cent in 2020.
“So far this has accelerated to 44 percent of all Knight Frank UK sales outside London.”
House prices in London have risen 6.8 percent since January, well below the national city average of 9.2 percent. Houses in the vicinity of the capital only saw a price increase of 4.6 percent.
While house price growth has remained stable so far this year, rising mortgage costs and pressure on the cost of living have led experts to speculate that a downturn is imminent.
Data from HMRC shows that monthly real estate transaction levels in September were flat month-on-month, but were down 32 percent compared to the year before.
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 somewhat historic nature of these latest figures reflects how activity began to stagnate even before the traumatic events in late September. After the mini-Budget, it felt like someone had turned off the phones in our offices from which we are only slowly recovering as the uncertainty still lingers.
“Nevertheless, many are determined to take advantage of more favorable loan terms before interest rates go even higher.”
Last week, the average fixed rate for a two-year mortgage across all loan-to-values rose to 6.53 percent, the day after new Chancellor Jeremy Hunt recalled much of the government’s package of tax cuts.
The average rate for five-year fixed deals also rose to 6.36 percent, despite falling slightly below 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 more was in August 2008 during the fallout from the global financial crash 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 deal is expiring, or because they have agreed to a home purchase, have been urged to act, but not to panic.
Banks and mortgage banks are still lending and mortgages are still being offered and applications are being accepted.
However, rates change quickly and there is no guarantee that deals will last and not be replaced by higher rate mortgages.
This is Money’s best mortgage interest calculator powered by L&C that can show you deals that match your mortgage and property value
What if I have to transfer?
Borrowers should compare rates and speak to a mortgage broker and be willing to trade to get a rate.
Anyone with a fixed-rate deal that expires in the next six to nine months should research how much it would cost to re-mortgage now — and consider taking on a new deal.
With most mortgage agreements, costs can be added to the loan and they are not charged until it is closed. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I buy a house?
Those with a home purchase should also aim to get rates as soon as possible so that they know exactly what their monthly payments will be.
Home buyers should be careful not to overextend themselves and be prepared for the possibility that house prices could fall from their current high levels as higher mortgage rates limit people’s borrowing capacity.
Compare mortgage costs?
The best way to compare mortgage costs and find the right deal for you is to talk to a good real estate agent.
You can use our best mortgage interest calculator to display deals that fit your home value, mortgage size, term and fixed interest needs.
However, keep in mind that rates can change quickly, so the advice is that if you need a mortgage to compare rates and then talk to a broker as soon as possible, they can help you find the right mortgage for you. .
> Check out the best fixed rate mortgages you can apply for
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