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This week, the Nationwide Building Society reported that the average home price in the UK was £271,619 in June.
But how useful is this, in the words of my late friend Charles Fairhurst, saying, “All homes are local.” What he meant was that the price or rent of a home, and whether it was purchased, permitted or constructed, would be determined by local factors as much as national factors such as mortgage fees and taxation.
Local factors can affect how valuable it is and how happy someone is to live there. This includes details of the property, such as its location, but can also be extended to factors that are not easy to quantify, such as how potential buyers feel when walking the door. This fluctuation leads to a wide distribution of prices and price growth that cannot be easily reflected by a single domestic price measurement. The UK housing market’s total outlook is poor, with price stagnation and activity stagnation and the most likely outcome in the coming years. However, the performance of the local housing market can be quite different.
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Local housing markets tend to follow what real estate agents call the housing market cycle. In early stages of the cycle, such as following the recession in the early 1990s or late 2000s, housing market activity and prices tended to recover first in central London, before the recovery spreads north and southwest throughout the capital. They then move to Home County, then to even more expensive parts of England. Ultimately, if the cycle lasts long enough, it spreads to the lowest priced market. For example, if you start looking at Kilmarnock, a place where family ties are located, you’ll top the charts due to increased home prices.
For a while, there were signs we were in the second half of the cycle. The East Ayrshire Council area, home to Kilmarnock, began to hit the top edge of the local government price growth chart in 2019. As we looked into in the previous article, the housing market in central London has been stagnant since 2014.
Following the pandemic, there was a brief interlude as space races exploded in activity and housing prices across the country, including the southern part of England. However, since mortgage rates began to rise in 2022, there has been more divergence between southern England and other parts of the UK. It reinforces the view that it is in the late stages of the housing market cycle.
Despite being a national phenomenon, rate rises have a different impact on local markets. The immediate impact of the 2022 rise rate is similar nationwide, with prices falling by around 5%, but since then the trajectory of local market home prices has been more diverse. Prices in London and southern England may be stagnant, but markets in other parts of the UK quickly recovered. It is now surpassing its 2022 peak in many places.
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The reason for this variation is that mortgage borrowers in more expensive regions of the market, such as southern England, tend to receive greater loans than their income than other parts of the country. Unfortunately, the rise in mortgage rates mean that these big loans are affordable and fewer people can afford to buy them. On the other hand, those who can still buy are packed with the fact that they are more likely to pay off their mortgage. For example, UK financial data for the first quarter of 2025 shows that a typical first-time buyer in the southeastern England equaled 23.8% of total revenue, compared to 19.4% in both the Northern England and Northern Ireland regions. This is higher than it was a few years ago, but it shows that despite the current mortgage rate environment, there is still the ability to borrow in a more affordable market. As a result, prices have typically risen in markets with low returns over the past few years, while prices have fallen in more expensive markets.
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It appears that this local market will continue to be a variation in the future. A growing challenge for the more expensive market is the increased number of homes listed for sale. Zoopla analysis shows the inverse relationship between changes in home prices and the number of homes sold for the past year. The biggest increase in the number of homes for sale has been recorded in southern England, where price growth is more modest, but in other parts of the UK, homes that can be purchased are more limited, and increased prices combined with affordable prices have increased.
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There appears to be a discrepancy between the price the seller wants and what the buyer can afford in more expensive markets. Many potential sellers have prices expected in post-pandemic markets when buyers’ demand was supported by mortgage rates below 2%.
Unfortunately, most buyers are currently limited to mortgage fees of 4% or more. If sellers’ price expectations are realistic, sales are still happening, but more and more people are not. For example, Zoopla reports that the average time to sell is 45 days, but 22% of listed homes have been on the market for more than six months.
Rather than marking the end of the previous housing market cycle, rising mortgage rates strengthened the patterns that are normally seen in the later stages. It is not yet clear why this deadlock can cause a continuous slow stagnation in the future.
So where does this leave the UK’s housing price index and other national indicators? They are still useful as a measure of general health and direction in the housing market, but if you are considering selling or building a home, it is important to pay attention to what is happening in the local market. If not, you may find your home added to the growth list of people struggling with sales.
Neal Hudson is a housing market analyst and founder of Consultant Build Place
