Strong House Price Growth Witnessed in Areas with Low Unemployment

Strong House Price Growth Witnessed in Areas with Low Unemployment

Sarah Beeny’s Tepilo analyses the close connection between rising house prices and improving unemployment rates across the UK.

Areas generally become desirable in the first place because they are excellent places to live and work, with good job opportunities located in an area itself or nearby.

It therefore makes sense that areas with low unemployment levels are particularly attractive to buyers, with soaring house prices to match this thriving demand.

The latest research from Lloyds Bank has outlined the connection between low unemployment and high house prices in greater detail. In the past decade, the areas with the largest drops in unemployment saw house prices soar by nearly £100,000.

By contrast, the 10 areas with the highest unemployment rates have witnessed house price growth of just 10%, less than half the national average of 25%, since 2007.  

The research found that the areas with the biggest improvements in unemployment rates have typically experienced above average house price increases over the last ten years. In the past decade the 20 areas that have recorded the sharpest drops in unemployment have, on average, witnessed house price growth of nearly double the national average (48% to 25%). The 10 areas with the largest falls in unemployment, meanwhile, have seen even bigger house price rises, averaging 53%, in the last ten years.

Of the top 20 areas with the largest falls in unemployment, the London borough of Waltham Forest has been the best performing in terms of house price rises, up by 92% over the last decade from £233,779 to £449,384.

In most cases, those areas with the best unemployment rates have, on average, outperformed the national average house price growth, but this is not universal. There are some exceptions to this rule.

This is particularly the case in the North West, where a number of local areas appear in the top 20 in terms of improved unemployment performance, while at the same time recording only very modest house price rises. House prices in Liverpool, for example, have only risen by 8% in the last decade (from £144,135 to £155,100) despite considerable falls in unemployment and regeneration works inspired by the city’s status as European Capital of Culture in 2008.

Halton, meanwhile, has seen house prices increase by just 7% across the last ten years - from 139,580 to £149,243 – despite sharp falls in unemployment, while Knowsley, a large village in Merseyside, has only witnessed house price gains of 5% (from £134,231 to £141,075).

As for those areas that have performed worst in terms of unemployment in the last decade – either witnessing rises or very slight falls – house price rises have stayed broadly in line with the national average (26% to 25%).

Nonetheless, seven of the 10 worst areas for unemployment saw house price gains that were well below their region’s average, further highlighting the connection between house price rises and employment opportunities. Since 2007, the 10 areas with the highest levels of unemployment have recorded average house price growth of only 10%, well below the national average.

Over the last decade as a whole, average house prices in the UK rose by 25% (£49,557). The average unemployment rate during this time was 2.8%.

Price growth isn’t merely driven by a strong labour market and consumers having more money in their pockets – there are various other factors at play, including affordability, the supply-demand balance and wider economic and political issues – but low levels of unemployment and the creation of extra jobs is usually a good sign for the housing sector. When people have strong, stable jobs and more money to play around with, the prospect of buying a home – and tying yourself into a long-term mortgage deal – becomes that much more appealing.

For sellers, if you live in an area with good levels of employment or excellent transport links to ferry people to areas with a high concentration of jobs and job opportunities, you can expect high demand from buyers for your home and excellent prospects of achieving your asking price or above.