Posted on 14th August 2015

Will the Northern Powerhouse Affect Property Affordability in the North East?

Martin Williamson, Head of Residential Property

The concept of a Northern Powerhouse was coined more than a year ago by Chancellor George Osborne to describe his vision of a more prosperous north.

At the time, questions were asked about whether the impact of Northern Powerhouse plans would be felt on the ground.

Since then, the project to re-balance the UK economy has begun to gain momentum, with Greater Manchester in particular seizing the idea with both hands and agreeing to elect a mayor in order to get powers over the likes of transport, fire services and planning.

So, if the North East follows suit and gets over the issue of a mayor, which has become something of a stumbling block, what impact could that have on home owners and prospective buyers?

Well, the Conservatives have done some number crunching, using data from the Office for National Statistics along with information from the House Price Index and the Annual Survey of Hours and Earnings.

The idea was to put together a picture showing how affordable property has been, taking into account average earnings, for the UK since 2000.

Results show affordability in the North East has been steadily reducing over the years. In 2000, the average house price in the region was around 4.5 times average earnings. This crept up to nearly nine times in 2007 and stood at eight times average earnings for 2014.

If the region enjoys further economic growth, as Osborne set out, that could naturally have a knock-on effect on property prices.

As areas become more desirable, house prices are likely to rise. But, will earnings keep pace, meaning that affordability ratios stay the same, or will prospective buyers find themselves even further away from that first rung on the property ladder?

That largely depends on whether supply increases with the demand which could come from more people being in secure work, and with the calibre of the work on offer rising.

If the North East is able to seize power over transport, for example, gaining the ability to invest in better links and infrastructure, then that will influence property prices wherever improvements are made. The gentrification of an area, which has been dubbed the Waitrose Effect, where there are increasing numbers of wealthier residents in a community, also pushes the cost of buying a house up.

While growth must be welcomed, economic success does bring with it questions over the affordability of property. It could be that as well as being part of the Northern Powerhouse, the region becomes a property powerhouse.

Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.uk or call 01325 341500.

Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise.

For further information please contact Martin Williamson