North-South shift? House prices in the North East surge while London stalls

House prices are continuing their upward trend, but a clear geographical divide is emerging.

ONS data shows that while the North East has seen the highest house price growth in England at 9.1%, London lags behind with just 2.3% growth in the last year.

This shift challenges the long-standing dominance of the capital in the property market, raising questions about what’s driving this regional divide and what it means for those looking at buying a house.

Why are house prices in the North rising so fast?

The North East has led house price growth in early 2025, with prices increasing at nearly four times the rate of London. Several factors are behind this trend:

• Affordability: The North East remains one of the most affordable regions in the UK, making it attractive to first-time buyers and investors looking for better value.
• Economic growth & investment: Major regeneration projects in cities like Newcastle and Sunderland, along with increased government infrastructure spending, are boosting demand.
• Changing work patterns: Hybrid and remote work trends continue to allow professionals to move away from London, opting for more affordable northern cities.
• Higher rental yields: Investors are being drawn to the North East due to stronger rental yields compared to the capital.

Darrell Walker, Group Sales Director at Chetwood Bank, notes: "We've seen an increasing number of landlords diversifying their portfolios to include northern cities, where the potential for price growth and rental returns is higher."

Darrell Walker

Darrell is an award-winning senior banking and financial services leader with a strong track record in achieving commercial goals. Experienced in stakeholder management, team leadership and relationship building, with expertise gained from branch banking to senior leadership roles.

Is the capital losing its appeal?

London’s sluggish house price growth, at just 2.3% over the past year, is a stark contrast to the North East. While demand in London remains strong, several challenges are holding back price increases:

• High property prices: London remains the most expensive region in the UK, with buyers struggling to afford homes despite stable wages.
• Stamp duty changes: Investors have been cautious following recent changes to tax regulations, which have made purchasing in London less attractive.
• Interest rates & mortgage costs: Higher mortgage rates have had a greater impact in London, where loan sizes tend to be larger. However, falling inflation statistics mean mortgage rates have started to come down.
• Shift in demand: The post-pandemic trend of buyers looking for more space and affordability has continued, with many opting for commuter towns or regional cities.

Tim Parkes, CEO of RAW Capital Partners, comments: "London will always be a global property hub, but we're seeing a rebalancing as buyers look for better affordability and investment returns outside the capital."

Tim Parkes

Tim has over 30 years of experience in fund management, banking, and financial services, including senior roles at a FTSE-listed bank and a decade in offshore fund management. He spent 17 years at Barclays, serving as Managing Director of its international banking division and leading major transformations in mortgages, banking, and payments.

What’s next for house prices?

Looking ahead, the future of house prices will depend on several key factors:

• Interest rate cuts: If the Bank of England moves forward with expected interest rate reductions, borrowing could become cheaper, driving more demand.
• Government housing policy: Any new measures to boost homebuilding or support first-time buyers could impact regional markets differently.
• Economic outlook: The economy’s performance will shape buyer confidence and affordability levels.

Experts believe that while London’s house prices are unlikely to fall significantly, growth will remain modest compared to other regions. Meanwhile, the North East and other lower-priced regions may continue to outperform, as affordability and investment potential drive demand.

With a clear North-South divide emerging, the UK property market is undergoing a significant shift - one that could redefine where buyers and investors put their money in the coming years.

The shifting landscape of house prices highlights a potential long-term rebalancing between the North and South.

While the North East experiences rapid growth, London’s slower pace raises questions about its future dominance in the property market. With economic policies, interest rates, and buyer demand continuing to evolve, the coming months will be crucial in determining whether this trend is temporary or the start of a lasting shift in the UK’s housing market.

If you are planning on buying a house you may want to see our house viewing checklist and our guide on building surveys. Also, if you are looking to sell, you can use our 'How much is my house worth?' guide to make sure you get a fair price.