Space beats location: UK city dwellers relocating drive up house prices elsewhere

Work-from-home trend means house-price growth in most cities is now outstripped by increases in surrounding locations

Towns outside London have seen a huge price in crease following the pandemic. Getty.
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UK city slickers relocating in the hunt for more space since the start of the pandemic are driving up house prices in suburban areas on the outskirts of major centres.

While house prices in major British cities, excluding London, grew by an average of 8.9 per cent since the crisis began last year, in the areas surrounding those cities, average house-price growth was much higher, at 10.8 per cent, according to UK lender Halifax.

“We’ve seen evidence of this in areas right across Britain, with house-price growth in the vast majority of cities now being outstripped by increases in their surrounding areas,” said Andrew Asaam, mortgages director at Halifax.

The figures are based on mortgage transactions included in the Halifax House Price Index between March 2020, when the first lockdown restrictions were introduced, and June 2021 when the government’s stamp duty holiday started unwinding.

Mr Asaam said the pandemic has affected the housing market across the UK, fuelled by demand for more space and a desire during the work-from-home trend to move away from city centres.

“Many have prioritised space over location as a result of more time spent at home over the last year and a half,” Mr Asaam said.

“As consumers look for value in the market, that inevitably leads people to look farther afield from major city centres, where you tend to get more property for your money.”

UK property prices have soared since the start of the pandemic, driven by pent-up demand during lockdowns and Chancellor of the Exchequer Rishi Sunak’s stamp duty holiday, which offered buyers a saving of up to £15,000 ($20,551) on the first £500,000 of a purchase.

However, house-price growth cooled in July, growing at its slowest rate since March, the latest Halifax house price index showed, in a signal that tapering the stamp duty holiday has taken momentum out of the booming British market.

The average value of a home rose 7.6 per cent in July to £261,221 ($358,418) compared with the same month a year ago, below the 8.7 per cent annual rise recorded in June.

Halifax said that the tax break provided even more incentive for those buying larger, family-sized homes, with the demand helping to drive faster price growth in areas farther from major city centres, where buyers hope to secure better value.

In Plymouth, on England’s south-west coast, for example, the city recorded price growth of 5.8 per cent between March 2020 and June 2021, while in the surrounding areas, the average was 16.1 per cent.

This was driven by locations such as South Hams – site of Salcombe, Britain’s most expensive seaside town – which Halifax said had seen exceptional house price increases of 26.3 per cent during the pandemic.

Meanwhile in Leicester, house prices in the city grew by 6.5 per cent over the same period, compared with a rise of 12.1 per cent on average in the surrounding area, with Rutland and Melton up by 22.5 per cent.

Northern cities in England tell a different tale, however, with price increases of 6.5 per cent in Newcastle still outstripping locations in the surrounding areas, which have grown by only 4 per cent.

While Halifax did not include London in its study, the number of Londoners buying homes outside the UK capital soared to a record high in the first half of this year, according to a recent Hamptons report, as the pandemic encouraged residents to quit city life and buy elsewhere in Britain.

Updated: August 27, 2021, 11:57 PM