Headlines
- House prices in the North East are the lowest in England and Wales
- First time buyers in the North East pay less for their first home than elsewhere in the UK, but the cost of a first home has risen substantially over the last 15 years
The Government has several aims in terms of housing in England. The main aims of Government housing policy are that everyone should have the opportunity to rent or buy a decent home at a price they can afford, in a place where they want to live and work.
More homes are needed to meet the rising demands of a population that is both increasing and ageing; further analysis on the North East’s population is provided in the population chapter. The Government has set a target to provide three million more homes in England by 2020 which will include more affordable homes to rent or buy.
Most people would like to own their home and there are a range of low cost home ownership schemes available for people who cannot afford to buy a property outright.
This chapter looks at some of the key indicators in relation to housing in the North East and in particular issues arising from house prices and affordability. The analysis will compare how the North East is performing against other regions in the UK as well as how things have changed in the North East over time. For more information about housing stock and demand indicators please refer to the Housing: Dwelling Stock and Demand chapter.
As of quarter two 2010, median house prices in the North East remain the lowest in England and Wales at £124,000. The England & Wales median house price was £182,500 for the same quarter - £58,000 higher than the North East average figure. Whilst house prices are lower than elsewhere in the country, the median is only £7,5000 - £11,500 lower than the other two northern regions of Yorkshire and Humberside and the North West – compared to a difference of £65,500 - £100,500 between the region and the South West and South East respectively. Unsurprisingly house prices in London are much more inflated than the rest of the country – with median house prices reaching £285,000. The chart shows fairly stark contrast in house prices between the northern and southern regions of England and Wales. It is important to note that house prices not only differ between regions but also within regions and across different types of housing.
House prices are comparatively low in the North East – however across all the regions house prices are currently lower than they have been in recent years. The following chart shows house prices in the North East and in the UK indexed against house price value in 2002. The trend shows that between 2002 and 2005 house prices in the North East rose more sharply than in the rest of the UK. The rate of growth slowed between 2005 and 2007 before peaking in 2008. In the North East house prices have decreased since early 2008 and continued to decline up to May 2009. However the 16 months to October 2010 show that house prices are beginning to increase again - although the trend is somewhat erratic. In the UK the pattern is very similar – with an increase also apparent between May 2009 and October 2010.
Ratio of Lower Quartile House Price to Lower Quartile Earnings
In simple terms affordability can be defined as the relationship between house price and income. CLG measures average house prices and average incomes and in particular focuses on the ratio of the lowest quartile of house prices to the lowest quartile of incomes. The principle of measuring lower quartile incomes to lowest quartile prices is a fairly crude measure of affordability and does not take in to account various other factors that contribute to the complex nature of housing affordability. In 2009, the North East had the lowest ratio of lower quartile house price to lower quartile earnings of all the English regions. The North East ratio figure was 4.9 compared to the national average figure of 6.3. In simple terms this means that housing is more affordable in the North East than it is elsewhere in England. However, this may be a reflection of pockets of high level deprivation in the North East and the most affordable property may not be desirable or suitable to the potential buyer. The trend information shows that affordability has become an increasing problem both in the region and in the country as a whole – particularly after 2002. The ratio of lower quartile house price to lower quartile earnings decreased nationally and regionally in 2008 and 2009. It is important to note that a decrease in the lower quartile ratio does not necessarily equate to increased affordability as during this period access to mortgages had been substantially reduced.
Additional Affordable Dwellings
In 2008-2009 the North East saw 1,410 additional affordable dwellings this is almost a third of all additional dwellings in the North East in that 12 month period. The annual volume of additional affordable housing peaked in 1993-94 before falling to its lowest annual net additions in 2002-2003. Over the last 6 years the volume of net additional affordable dwellings has increased fairly steadily.
First Time Buyers
First time buyers in the North East were paying a comparatively lower price for a home during qurter 2 2010 compared to elsewhere in the UK. The average cost of a home for a first time buyer in the North East was £116,489 compared to £186,228 in the rest of the UK. Increases have been seen in the median house price for first time buyers for the past 5 quarters nationally, reflecting increased confidence in the housing market since the end of the recession. However, the market for first time buyers in the North East has remained comparatively flat over this period, and has fallen back from the regional high recorded in Q4 2009.
Mortgage Advances to First Time Buyers
In the UK mortgage advances increased, on average, by £94,000 between 1995 and 2005. In the North East this increase was closer to £59,000 with the average mortgage advance being £93,040 in 2005. The biggest hike in mortgage advances over the 10-year period was experienced in London – with first time buyers borrowing £149,229 more in 2005 compared to 1995.