Member Article

Surprise September fall for North East house prices

• Property prices fall by 2.8% over last 4 weeks – but remain 2.3% up 2015 • The price of a typical North East home is September was £159,106 - £4497 less than August. • Easington (3.2%), Houghton-le-Spring (2.7%) and Blyth (1.9%) only areas surveyed to record rise • Durham City named Best Buy with annual price rise of £19,000 – compared to just £179 in Seaham. • North East rents fall by £3 to £562pcm – but rental yields rise 0.2%. Killingworth named best to invest for strengthening returns for investors.

Research from sales and lettings firm KIS shows North East house prices suffered a surprise September fall – slipping by 2.8%

The typical North East home is now valued at £159,106 - £4497 less than four weeks ago.

The fall follows three successive months of growth, which had seen prices rise by 6.4% between June and August. Property prices in the region have risen by 3.6% over the last financial quarter and are up 2.3% over the course of 2015.

Only three of the twenty areas surveyed recorded rises – with the largest coming in Easington, where prices were 3.2% higher in September compared to August. Houghton-le-Spring (2.7%) and Blyth (1.9%) also saw prices rise over the past four weeks.

Killingworth saw prices fall by 5.7% - although they had risen by 9.9% in the preceding two months. Prices also fell sharply in Whitley Bay, with a fall of 4.4% all-but-wiping-out the 4.5% rise seen over the course of July and August.

Jarrow (-2.5%), South Shields (-2.4%) and Newcastle and Gateshead (-2.3%) were other big value losers.

Compared to September 2014, Seaham has recorded the slowest price rise – with a rise of just 0.2%, or £179 in cash terms. Durham City meanwhile has seen prices rise by 9% in the same period, a jump of £19,116.

With prices in Durham City falling slightly over the past four weeks, it is named this month’s Best Buy for the second time in three months.

48% of homes in the City of Durham Parliamentary Constituency are semi-detached, with a further 24% terraced. 63% of properties have at least three bedrooms. The most common number of people in a household is 2 (36%) followed by 1 (30%).

19% of properties are socially rented, with a further 13% privately rented. Across the North East region as a whole, 23% of properties are socially rented, and 13% privately rented.

At the time of the last census, 64.8% of DH1 residents rated their health as “very good”, compared to a national average of 47.2%

North East rents fell by £3 in August, with the typical property in the region now costing £562 per calendar month to rent.

Weakening property prices, however, saw a corresponding rise in rental yields - mean investors will get a marginally stronger return on their investment this month, with the average rental yield rising by 0.2% to 4.2%.

Easington (£411pcm) remains the cheapest place to rent in the North East, while Durham City (£815pcm) remains the most expensive.

Gateshead remains the region’s Buy to Let Capital, with an average return of 6.2% for investors. Other strong performers for rental yield include Peterlee (5%) and Seaham and South Shields (4.6%)

The lowest rental yields continue to be found in Whitburn where landlords can expect a 3.2% return on their investment.

Killingworth, Seaham and South Shields all saw rental yields rise by 0.2%, with Killingworth named this month’s Best to Invest due to its corresponding fall in property prices.

37.5% of Killingworth properties are terraced, with a further 29.5% semi-detached, and 43.5% of local homes have at least 3 bedrooms.

67.5% of homes are owner-occupied out-right, or with a mortgage – above the regional average of 61%. 22% of homes are rented from registered social landlords or local authorities, identical to the regional average. 7.5% of properties are rented privately, significantly below the regional average of 13%.

Ajay Jagota, Founder and Chief Executive Officer of KIS Group responded to the figures.

“Surprising as it may seem to some, there’s a certain inevitability to North East house prices falling back slightly this month, coming as the fall does after three months of unprecedented growth. If anything, a slight application of the breaks is more than a little desirable, for first time buyers in particular.

“Even if this is the end of a summer mini-boom, prices have come to rest in a much stronger place than we’ve seen in months, let alone years. To put it into context, if you own a house in Whitely Bay, a monthly fall in your property’s value might sound alarming – but your home is still worth £8000 than it was in January.

“The most likely reason for the fall is that, for now at least, the North East doesn’t appear to be suffering from the same lack of supply which is driving up prices in the rest of the country. “Durham City is proof of that theory. It’s no secret that demand for properties in the city is emphatically outstripping supply, and no surprise that prices have risen by £19,000 in just 12 months as a result – compared to a rise of less than £200 down the road in Seaham.

“Last week I called for the Bank of England to grasp the nettle and raise interest rates now. The economy is in a robust enough position to stand it - with employment high and wages finally increasing - and waiting for inflation to catch up could mean the economy gaining too much momentum and the Bank having to raise rates higher and faster to slow it down again.

“If property prices have indeed peaked, for the time being at least, there is an even stronger case to be made for a gradual rise in interest rates to begin straight away”.

This was posted in Bdaily's Members' News section by Ajay Jagota .