Back in 2016, the capital’s housing market seemed unassailable. London was the first place to recover after the Financial Crisis and saw the fastest house price growth afterwards. The average home in London now costs £514,733, an increase of 82% since 2007 and almost £100,000 more than a decade ago.
While this is a significant rise, house price growth in the capital has actually slowed rapidly since 2016 and, since then, has mainly been confined to Outer London, which is more affordable. But as London has stalled, prices in many places outside the capital have continued to rise, most notably during the Covid pandemic and the “race for space”. It's now been 100 months and counting whereby property prices have been rising faster outside of London.
According to our analysis of the latest ONS house price index, the number of local authorities that have seen more house price growth than London since 2007 has been increasing steadily since 2021. Between 2015 and 2020, there was only one local authority that had outperformed London. This year, that figure rose to seven local authorities.
Between 2015 and 2020, only the Shetland Islands saw more post-crisis house price growth than London. This local authority now boasts average prices of £209,653, having seen growth of 148%, or £124,980, since 2007. Neighbouring Orkney Islands made the list of London beaters in 2021 having now seen price growth of 129% since 2007.
Back in 2022, Basildon joined the list, closely followed in 2023 by Epsom & Ewell, Stevenage and Thurrock, who were big winners from the Covid induced race-for space that saw record numbers of Londoners leave the capital.
This year, there are now a total of seven areas that have outperformed London. Bristol, Dacorum, Epping Forest and Trafford have all made the list. However, Basildon, Epsom & Ewell, Thurrock and Stevenage all slipped off the list this year. These areas were hit hard when mortgage rates peaked last year, weighing on price growth.
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But it probably won't be long until they rejoin, closely followed by some new areas. Looking at the next contenders for London overtakers, Bath and North East Somerset is now level-pegging with the capital in terms of post-crash price growth – homes in the local authority cost an average of £431,400, 82% more than in 2007.
The remaining locations in the running to overtake the capital are heavily weighted towards the South and South East of England. Hot on Bath’s heels are East Cambridgeshire and Thurrock, both of which have seen price growth of 81%, and Stevenage, Cambridge and Broxbourne, all with 80%.
Adur (78%), Hastings (78%) and Oxford (77%) are all catching up with London, but are being outpaced by Manchester, which has seen post-2007 house price growth of 79% to £237,847. Depending on the trajectory of price growth over the rest of this year, Manchester could conceivably soon join Trafford in overtaking the capital.
All this begs the question of whether increasing numbers of locations will see house price growth overtaking London in the coming years. There are many affluent locations in both the Home Counties and Northern England where prices are now within a whisker of overtaking the capital. However, we think that falling interest rates will probably support London prices over the next couple of years, meaning that price growth in the capital could once again outpace the rest of the country.
