05 January 2016

Further thoughts about home mover activity

4 minute read

  • The North-South divide is getting wider
  • The cost of trading up to a bigger house is increasing
  • More people may be choosing to improve

Continuing the theme from my last blog, we examine whether growing disparities in regional house prices, increasing costs of trading up or a desire to improve rather than move can explain the surprisingly low number of home movers.

North-South divide – getting wider

A lack of movement between UK regions could be contributing to the lack of home mover activity. The gap between the price of a typical house in North and South of England has been widening dramatically since the financial crisis, as shown in the chart below.

House price gap between South and North England graph

Indeed, the gap between prices in Southern England (London, Outer South East, Outer Metropolitan, South West and East Anglia) and Northern England (North, Yorkshire & Humberside, North West, East Midlands and West Midlands) is now at a record high in both cash and percentage terms. Average prices across the South are now in excess of £300,000, more than twice as high as those in the North.

Most home moves occur within rather than between regions, but it could be that growing regional disparities are limiting mobility, especially for those looking to move South.

Trading up becoming trickier?

“Is the cost of trading-up acting as a brake on overall activity?”

Another factor we should consider is whether the cost of trading-up to a larger property has increased to such an extent that it is acting as a brake on overall home mover activity. As usual the picture isn’t clear cut.

We looked at trends in the price differentials between property types in the Outer South East region (as this is the region that typically has the most home movers). While there hasn’t been a significant increase in the percentage differences, the cash gaps have increased as a result of house price growth. This could be exerting more of a drag since people’s earnings have been under unusual pressure in recent years.

Price differential between property types graph

Indeed, the jumps between each property type are now close to record highs in cash terms. For example, someone looking to move from a flat to a terraced house in the Outer South East region would need to find an extra £53,000. Even if a would-be home mover could finance this through a larger mortgage, this implies a significant increase in monthly mortgage costs. This would represent an extra £240 per month – 11% of take home pay for an average full time worker in this region.

The increasing cost of trading up in cash terms may have been exerting a particularly significant drag in recent years, because until fairly recently earnings hadn’t been rising fast enough to keep up with the rising cost of living. Hopefully now that inflation is low and wage growth is rising more strongly, if this was the constraining factor home mover activity will start to recover in the quarters ahead.

Improving rather than moving?

It may also be the case that more households are choosing to improve their home rather than move. The cost of moving is not trivial – stamp duty alone on the typical home amounts to around £2,000 – and new permitted development rights, which came into force in May 2013, make it easier for home owners to extend their properties.

However, there doesn’t appear to be much evidence to suggest a noticeable pick up in home improvement, if anything, spending on items relating to home improvement seems unusually subdued by historic standards, as shown in the chart below.

Spending on home maintenance graph

The unsatisfactory conclusion

The thing that stands out is that there is no single explanation that can explain why home mover numbers are so depressed. Our hunch is that the more important factors are the lack of supply on the market (which as we described is something of a ‘chicken and egg’ issue) and the increased cost of trading up in an environment where household budgets have been under pressure for some time.

Hopefully as the economy continues to recover, labour market conditions improve and confidence remains high home, mover numbers will recover, but this is an issue we’ll continue to watch closely.

About the author


Andrew Harvey is a Senior Economic Analyst in Nationwide’s Economic & Market analysis team. His particular areas of expertise are the UK housing and mortgage markets and house prices.

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