Lloyds Bank

House prices hold up in areas with the brightest employment prospects

28 April 2014

  • House prices in areas with largest falls in unemployment rise by almost £136,000 in the last 10 years.
  • This is over 3 times the national average house price increase.
  • The top ten areas with the highest rise in the unemployment rate have seen house prices rise by close to £21,000 since March 2004.

Homeowners in local authorities with the largest falls in the unemployment rate have seen the value of their property rise by almost £136,000 over a decade, according to new research by Lloyds Bank. The average house price in the ten local areas that recorded the largest falls in the unemployment rate in the decade to March 2014 rose by 68%, or £198,709, to £334,404. The unemployment rate in these areas fell by 1.3% during the period.  

House price performance in inner London and northern Scotland significantly better than other areas – and a better employment record

The rise in house prices in the ten top performing employment locations over the past decade is split between areas of northern Scotland and inner London. In the Shetland Islands the average house price has more than doubled (104%) in the past decade to £153,782. The Shetlands is followed by Hackney (84%), Southwark, Western Isles (both 78%), Lambeth (76%) and Tower Hamlets (72%). All of these areas have seen their unemployment rate fall by between 1.1% and 1.8% since 2004. (See Table 1)

These areas have outperformed the rest of the country as a whole, with UK average property prices growing by 22% (£36,482) to £199,039 over the same period, whilst the national unemployment rate is 0.5% higher.

At the other end of the spectrum the top ten areas with the lowest house price performance and a higher unemployment rate are generally concentrated in Northern Ireland and outside southern England. These areas include Lisburn in Northern Ireland where the average house price has grown by 5% to £121,310 in the past decade. Lisburn is followed by Craigavon in County Armagh (9%), Belfast (14%), Newport in south east Wales (15%) and Blackpool (19%). The top ten areas with the lowest price performance have an unemployment rate that is on average 2.2% higher now than in March 2004. (See Table 2)

Lower house prices in most local area districts during the 2008/09 recession

During the recent recession that lasted from quarter 2 2008 to quarter 3 2009 most areas in this survey recorded a contraction in the average house price - even in areas where the unemployment rate only rose marginally.

In the top ten areas where the unemployment rate showed the smallest increase during the recession, house prices still contracted by an average of 10%. In Gwynedd prices fell on average by 20%, followed by West Dorset (18%), Moray (17%), Ceredigion (11%) and Copeland (10%). (See Table 3)

In contrast, local authorities with the largest rise in the unemployment rate during the recession also recorded some of the sharpest falls in average property values. In Craigavon prices fell on average by 27%, followed by Blaenau Gwent (23%), Rotherham and Hull (both 21%) and Walsall (20%). (See Table 4)

Improving economic conditions and lower unemployment in the past year provides a boost for house prices

Falling unemployment in the past year has been one of the factors helping the outlook for house prices. In the ten areas with the largest fall in the unemployment rate since March 2013 the average house price has grown by 8%. Areas with the largest increases include Middlesbrough (12%), Hull (11%), Barking and Dagenham, Peterborough and Oldham (all 10%). In these areas the claimant count unemployment rate has fallen on average by 2% during the year.

Nitesh Patel, housing economist at Lloyds Bank, said:

"In general, house price growth over the past decade has been stronger in the areas that have seen the biggest falls in the unemployment rate as measured by the claimant count. Areas in northern Scotland and inner London have generally outperformed other areas on both house price performance and a lower unemployment rate.

"During the recession of 2008-09 property values fell across most areas, even where the unemployment rate rose only marginally. This does highlight that while unemployment is important there are also other factors that drive house prices, such as affordability, earnings growth and low housing supply which will have contributed to rising prices in the earlier year."

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