House price gap widens between areas of high and low unemployment

03 May 2016

  •  Houses prices grow by average of almost £90,000 in past decade in areas with lowest unemployment rate, almost five times more than those with high unemployment
  •  The 10 areas with largest drop in unemployment saw house prices increase by 76%

The gap in house prices between areas with the highest and lowest levels of unemployment1 has widened significantly over the past 10 years, according to the latest research from Lloyds Bank.

Average house prices in the 20 local authorities with the lowest rate of unemployment have risen by £89,446 since 2006 – nearly five times the rise for those with highest unemployment, which increased by just £18,657 over the same period.

The average house price for those high unemployment areas is £139,520 – which is £102,655 (42%) below the national average price of £242,175. By contrast, areas with the lowest unemployment rates have an average price of £352,224 - £110,049 (45%) higher than the national average.

Lloyds Bank Mortgage Products Director Andrew Mason said: "Employment boosts consumer confidence, helps put more cash into customers’ pockets and makes it easier to secure a mortgage, all of which drives increased housing activity. Unfortunately, in areas where more people find themselves out of work, house prices can stall as people are financially less able to progress up the property ladder, reducing demand.

“There are, however, other factors which affect house prices - such as lower mortgage rates, improved affordability and low housing supply - which will have contributed to rising prices in the past decade."

House prices rise steeply in areas with steepest unemployment drop

The 10 areas which have seen the largest falls in unemployment since 2006 recorded an average price increase of £200,155 (76%) to £464,373. Nine of these local authorities are in London, with four (Haringey, Hackney, Southwark and Waltham Forest) seeing average home values almost doubling in the past decade. Over the same period these 10 areas recorded an average decline in unemployment claimants of 2.4 percentage points (from 4.7% to 2.3%) four times the national decline of 0.6 percentage points (from 2.5% to 1.9%).This is in marked contrast to the 10 areas with the poorest unemployment performance where unemployment claimants increased by an average of 0.5 percentage points since 2006, with average house prices growing by only £24,587 (18%). Seven of these 10 areas are in the North West.

In the UK as a whole over the past 10 years, average house prices grew by 34% or £61,575, whilst the average unemployment rate was 3.0%. Excluding London, the average price growth for Great Britain fell to £47,920 (29%). The Lloyds Bank report also reveals that:

  •  The 10 areas with the lowest unemployment rates show an average house price rise of £107,000 (or 36%) since 2006.
  •  The four areas with the lowest average unemployment rate of 1.0% over the decade – Hart, West Oxfordshire, Mole Valley and North Dorset - recorded house price gains of between 33% and 44% (£65,000 to £142,000).
  •  The 20 areas with the highest unemployment recorded an average house price growth of just 15%, nearly half the national average, excluding London (29%), since 2006.
  •  There are five areas where the unemployment rate averaged at least 6% in the past decade – Kingston upon Hull, Middlesbrough, Wolverhampton, Birmingham and Hartlepool – where house prices grew by between 5% and 25% over the period.