Rural house prices buck gloomy trend

Apr 16 2008 by Adrian Pearson, The Journal

THE housing boom which has seen North East property prices more than double in just six years could be coming to an end, experts have warned.

The average house price for the North is now the lowest in the UK at £148,636, Government figures show.

And while estate agents in Northumberland are set to avoid the slump as rural house prices buck the national trend, homeowners in Tyneside who have seen the price of their property rocket face a drop in prices as high- street lenders make it harder for buyers to secure a mortgage.

Last night one of the North’s leading housing groups warned that the global credit crunch was making it increasingly likely that the region would see an increased threat of home repossession.

Monica Burns, National Housing Federation regional manager for the North East, said: “House prices in the North East have risen faster than any other region in the country over the past five years.

“Such rapid rises are simply not sustainable.

“With average house prices in the region around eight times the average income, even the most dramatic predictions of a fall in house prices would not make homes affordable for many first-time buyers as prices are so far out of their reach.

“As fears of a credit crunch grow, generous mortgage rates are dropped and more people become at risk of repossession, decent affordable homes provided by housing associations are needed more than ever.”

Earlier this month The Journal revealed how credit agencies had listed the North East as the most vulnerable to repossessions.

Figures collected by credit agency Experian suggested more than 300,000 households in the North East have debt problems which could make repaying their mortgages even harder as costs rise faster than wages.

However, estate agents in Northumberland could be among a handful nationwide who do not have to struggle with falling prices, as the rural housing market continues to outperform that of the city centres.

James Abbott of selling agents Smiths Gore, said homeowners in Northumberland would cope much better with difficult market conditions.

He said: “From our point of view the national stories of a fall in the housing market are simply not being felt here.

“As Northumberland has a very limited supply of housing, we are not seeing the drop in prices seen in some cities and towns.

“And because a lot of homebuyers in Northumberland are not seeking the 100% mortgage offers, we think a lot of our customers will be relatively unaffected.”

Newcastle Central MP Jim Cousins said the drop in city-centre house prices would not help the many people trying to get their foot on the property ladder.

Mr Cousins, who sits on the House of Commons Treasury select committee, said: “I don’t think we will see a complete crash in house prices in Newcastle.

“We may well see that prices drop to a level that people who live and work in the city can afford.

“What we need is a real attempt to solve the lack of affordable housing in Newcastle, because there are far too many young people who even at current prices cannot get a foot on the property ladder.

“I know there are some problems, particularly in the buy-to-let market, but let’s be clear, right now most houses in Newcastle are out of reach of many young people.”