Regional Market Outlook - August 2001

This Version: 10 August 2001

Not only is this bad news for the economy as a whole, but these differentials are unsustainable. Given share price declines and the global economic slowdown, the house price boom in the South and other favoured locations is fading, especially at the top end of the market. For footloose property owners in London, there is money to be made by relocating to cheaper areas away from the capital.

The narrowing of these regional differential will be partly the result of the ripple effect: the tendency of home buyers priced out of local house price 'hot spots', to substitute nearby, less preferred but more affordably priced properties, and in the process, bid up their prices. But there is another factor: while the manufacturing sector has borne most of the pain so far, the financial services sector, disproportionately important for London and its commuter belt, is following. A decline in Sterling, following the Dollar, against the Euro later in the year is a distinct possibility, despite lack of support for European growth from the European Central Bank. Interest rates prospects then become more uncertain.

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