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Economic growth delivers house price premium

Economic growth delivers house price premium

Monday, 25 June 2012 2:04 PM

Homes in the best-performing local economies have risen by almost £110,000 in the last decade, according to analysis by the Halifax.

The bank said the typical value of a home in the ten areas with the biggest increase in economic activity rose by 145 per cent from £75,222 in 1999 to £184,491 in 2009.

That is 31 per cent more than the £83,501 house price increase in the 10 areas with the smallest increase in economic activity.

The two areas seeing the largest house price gains over the 10 years were also among the best performing areas for economic activity.

Brighton & Hove saw a 206 per cent increase in house prices and the fourth biggest increase in the value of economic activity (63 per cent) while Cornwall and the Isles of Scilly had the second biggest rise in prices (198 per cent) and the sixth fastest economic growth (60 per cent).

In contrast, the two slowest-growing areas were Thurrock with 132 per cent price growth and Coventry with 133 per cent.

House prices in areas with good local economies have also been more resilient to the downturn since 2007. The ten worst economic areas have seen prices fall by an average of 27 per cent while the ten best have seen a fall of only 12 per cent.

Martin Ellis, housing economist at Halifax, said: “The marked differences in local economic performance across the UK appear to have had a significant impact on the housing market over the past decade. House price growth has generally been stronger in the areas that have seen the biggest increases in economic activity.

"The best performing areas have also been the most resilient in terms of house prices during the downturn since 2007.

"Looking forward, the pace at which the UK economy recovers will be a key determinant of the outlook for the UK housing market. Similarly, those areas that perform best in economic terms are likely to fare best in terms of house price movements.”

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