To Buy or Not to Buy: Houses, Flats or Terraces?


House prices are something of a national obsession in the UK, particularly in the capital where records have recently been set for the value of property. In the autumn of 2014 a number of flats sold in London’s Mayfair for a record-setting price of over £5,000 per square foot. To Buy or Not to BuyDespite this, there is evidence of a slight slow-down in the property market, even in London. It is believed that recent price increases and changes to mortgage lending criteria may be having a dampening effect. According to the British Bankers Association, mortgage approvals were down 10 percent in October 2014 compared to the previous year.

The plateau in the housing market may be temporary so it is perhaps a good time to take stock and consider some of the variables that might influence a decision to buy in the future.

London Compared With the Rest of the UK

Few British people are unaware that a significant house price differential exists between London and the rest of the UK, but how extreme is it? Detached houses tend to be the priciest properties in any city or region of the UK, so provide a useful indicator.Average Detached House Prices 2007-2014

Analysis Based on Land Registry Data

Evidently, house prices in the rest of the UK lag far behind the nation’s capital. Average prices for detached houses in London are nearly four times higher than in areas such as the Midlands and Greater Manchester. These figures have actually been exacerbated since the financial crisis as prices were closer to three times higher in London in 2007-08.

Another disparity between London and the other sample areas that can be observed in the data since 2007 is the overall change in detached house prices. Greater London prices have more than recovered their previous highs while the Midlands and Greater Manchester have shown a slight improvement but remain below previous highs set in the last property boom. This is reflected in broader Land Registry Housing Index data below.Land Registry Housing Index

Analysis Based on Land Registry Housing Index Data

It remains to be seen whether the regions will begin to catch up with London eventually or if London can retain its advantage over time.

What Types of Properties are Favourable?

The series of charts below show the average prices for different types of properties in each of the sample regions referred to above including London, the West Midlands, the East Midlands and Greater Manchester.Greater London Property Prices

Analysis Based on Land Registry Data

The chart for London shows a large disparity between detached house prices and other types of properties although the trend in housing prices over time appears to be identical for each type of property. In the latest figures, terraced houses and flats make up the cheapest types of properties relatively speaking and are similarly priced on average at £421,099 and £413,273 respectively (less than 2 per cent difference on average). Semi-detached properties are more expensive on average at £472,304 than terraced house or flats but still fall some way behind in terms of value compared to detached houses which average £812,095.

The trends are slightly different to London in both the West Midlands and the East Midlands as can be seen from the next image.East and West Midlands Property Price Trends

Analysis Based on Land Registry Data

It is notable for the West Midlands and the East Midlands that terraced houses are actually significantly cheaper than flats with the latest average prices being £89,307 for terraces and £95,940 for flats in the West Midlands, and £86,355 and £93,186 respectively in the East Midlands (marking a 7-8 per cent difference). This feature is even more noticeable when analysing the data from Greater Manchester.Greater Manchester Property Value Trends

Analysis Based on Land Registry Data

In this case terraced houses are in fact some way cheaper than flats which are actually more comparable in price to semi-detached houses. The latest price data shows on average that terraced houses cost £67,346 to buy whereas flats cost £119,877 marking a difference of 78 percent, although again, the trend in housing prices over time appears to be identical for each type of property.

Buyer Beware

Buyers of property always need to be aware of local markets in order to understand the different value propositions that certain types of property represent. Viewing data over a period helps to assess whether particular types of property are good value or merely cheaper due to the geographical context.

If you're unsure about your next move why not contact one of our conveyancing specialists for sound advice regarding the buying or selling property.

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