UK house prices rocket 25% in tourist hotspots

Increase threatens to price younger and lower-paid workers out of the market

The Cornish town of St Ives has introduced measures to limit the number of second homes. Photo: Getty

Annual house price growth rose by as much as 25 per cent in July in tourist hotspots around Britain, according to data from the UK's Office for National Statistics released on Tuesday.

House prices in these popular coastal and rural areas grew at about three times the UK-wide average of 8 per cent.

The places which experienced the most growth were Conwy in North Wales (25 per cent), North Devon (22.5 per cent) and Richmondshire in the Yorkshire Dales (21.4 per cent).

Seven boroughs in London bucked the national trend and recorded annualised house price falls.

The annual picture in July was contrary to the monthly trend which saw UK house prices fall at their steepest rate since 1992.

This fall was an anomaly, however, brought about by the ending of the stamp-duty holiday in June which had created artificially high levels of demand.

Throughout the pandemic, much of this demand has been focused on areas away from urban hubs as prospective house buyers have sought valuable extra space, either as a new main residence or second home.

This trend has resulted in the explosion of house prices in popular coastal and rural areas, with July's 9 per cent annual growth in prices for detached houses a corollary of property's "space race".

The coastal rush has also created unusually juxtaposed demographics in such locales.

The ONS's annual income data for 2020 gave the example of Cotswold residents who on average earn 28.7 per cent more than those actually employed in the area.

Young and lower-paid workers priced out

Another consequence of house price inflation in these coastal and rural areas has been the pricing out of younger and lower-paid workers.

For this cohort, the pandemic has dealt a double blow: propelling property prices on a relentlessly upwards trajectory, while at the same time further lowering wages and employment opportunities.

Across the UK, the poorest fifth of workers were more likely than the richest fifth to see a drop in income in the 12 months to March this year, according to the ONS.

Many work in the hospitality sector, which was harshly affected by Covid-19 restrictions. Numerous businesses were forced to place their workers on furlough or even close permanently.

When the furlough scheme was scaled back in July, the sector said up to 500,000 hospitality jobs were at risk

Hospitality is the biggest employer in tourist hotspots, meaning they had among the highest average furlough rates during the pandemic.

South Lakeland and Eden in England's Lake District recorded the highest monthly furlough rates of anywhere in the country in June 2020, at 40 per cent and 39 per cent respectively.

Rental market demand outstrips supply

With suppressed wages and inflated property prices, younger and lower-paid workers have become even more dependent on the rental market.

UK private rents increased by 1.3 per cent in the 12 months to August, according to the ONS, rising to 2 per cent if London is excluded – the only region to record a decrease (4 per cent).

Tourist hotspots were facing supply issues before the pandemic, but with stock being claimed by space seekers and holiday-home makers, the ONS suggests the growth of tenant demand is exceeding the supply of lettings.

A disproportionate number of second homes in these areas exacerbates the problem.

The ONS said on Tuesday that it was too soon to "know the full impact of coronavirus on housing affordability".