Propertyfinder.com's research looked at regional population changes brought about by both internal and international migration and compared them to house price changes.
The extra demand for housing that migration and immigration cause explain much of the regional difference in house price performance around the country. There is a 73% correlation between regional population growth and house price growth. Regions with the highest inward migration have seen the highest house price increases, while the least popular regions have seen house prices underperform. Exclude the North East, an exception to the trend, and the correlation is an astonishing 94%.
Warren Bright, chief executive officer of Propertyfinder.com, said: “The overall level of house prices depends largely on the wider economy. However the relative strength of regional housing markets is very clearly due in large part to population movement. Whether it is people wanting to buy their own home to live in, or investors providing rental accommodation to newcomers, demand for housing in the most popular regions has caused prices to rise the fastest. While these population trends continue, our research suggests that the best performing regions which have been attracting the most migrants will continue to see house prices outperform over the medium term.”
Supply is unable to match demand in popular regions.
London is a case in point. It has seen the fastest population growth over the last ten years (8%) and the fastest growth in house prices over the same period (216%). This is well above the UK average of 5% and 191% respectively. House prices are well above the national average and population density is ten times that of the second most densely populated region in Britain. Regions in the North of England have seen lower population growth and slower rises in house prices.
Bright continued: “This highlights the chronic supply/demand imbalance for housing in the UK. On average the population of the south is growing almost twice as fast as the north. The provision of new housing is lagging far behind, and prices, not surprisingly, keep on rising. London’s population alone will double by 2050 if its current rate of expansion continues – imagine the impact on house prices then.”
The North East is the exception to the trend. Despite having an exceptionally low growth in population, house prices have seen a significant rise over the last ten years. This is primarily because house prices were so low ten years ago that some degree of catch up was warranted. Even so, the region still has the lowest average house prices nationwide (£137,229). If you exclude the North East, the correlation between regional population increase and house price increase goes up to 94%.
Immigrants and UK migrants do not favour the same regions
London in particular is experiencing the fastest rate of population growth and rise in house prices, largely due to the fact that 36% of all immigrants set up home in the capital. Despite London being the choice destination for immigrants, British residents are moving out of the capital faster than any other area. 2004 figures show net migration of British citizens away from London stood at -116,200 but the city continues to grow faster than any other area of the UK with immigration rates ensuring London’s net population increase of 1.61% annually.
Top destinations for immigrants from outside the UK are London (36%), the South East (12%), and the East (8%). In contrast, London has the highest number of British citizens moving out, and the top destinations for them to set up home are the South West (0.67%), Wales (0.48%) and the East Midlands (0.42%).
Bright added: “UK residents of England’s two biggest cities, London and Birmingham, are clearly keen to seek a life in a less hectic environment and are moving away from these regions. The figures for London show extraordinarily high turnover in population. Newcomers from abroad are attracted to Britain’s big cities where work is easy to come by. After a time, city life can be pretty draining and once people are established they seek a less hectic life elsewhere and move out.”
Population growth set to continue
According to the Treasury’s December pre-budget report, Net immigration is forecast to continue at a rate of 185,000 - 190,000 – an increase on previous central predictions. National statistics predicts that net population will grow to 67,013,000 by 2031.
Household numbers are on the up too
Local government figures also show that household formation is on the up, due not only to population increase, but also the significant rise in the number of single person dwellings. With the DCLG’s projected increase in households of 209,000 per annum until the year 2026 the current new build rate of 170,000 new homes a year falls seriously under requirements.
Bright concluded: “Household formation is growing even faster than the population. That will only exacerbate the trends, pushing demand for housing further ahead of supply. Once again, regional differences will come to the fore.”
