UK repossessions see north-south split

UK repossessions see north-south split

United Kingdom

There is a clear north-south divide when it comes to housing repossessions, according to research by e.surv chartered surveyors.

Northern regions are seeing a higher number of repossessions than their southern counterparts.

E.surv’s analysis of court-ordered repossessions in the second half of 2011, broken down by post code, found the north-east and the M62 corridor were the regions where repossessions were highest.

The firm said that with public sector austerity and weak economic growth hitting northern regions disproportionately hard, borrowers in the north – particularly in urban areas dependent on public sector employment and with lower levels of affluence – have found it harder to keep up with mortgage payments.

“Banks are playing a vital role in keeping people in their homes,” said Richard Sexton, business development director of e.surv. “They’ve been increasingly forbearing to borrowers in mortgages in arrears, and this has kept repossessions levels deflated.

“But it can’t last forever. The pace of public sector austerity is quickening, and the economy has ground to a standstill. This will push up unemployment and pillage personal finances, forcing more people into mortgage arrears.

“On top of that, the cost of funding mortgages is increasing for banks. Their balance sheets are being stretched to busting point by the euro zone crisis, which will mean they simply can’t afford to support as many struggling borrowers. With the north more exposed to the grind of public sector austerity and a downturn in the economy, the north-south divide in repossessions levels could become even starker over the coming months.”

Repossessions in the North East were significantly higher than the national average of 15 per 10,000 households. In Darlington and Durham, there was an average of 24 repossessions per 10,000 households, 60% higher than the national average. Similarly, the M62 corridor, which includes industrial Lancashire and parts of southern Yorkshire like Bradford and Doncaster, has a high level of repossessions compared to the national average.

On a broad level, court-ordered repossessions were significantly lower than the national average in the Home Counties and the South West. Repossessions were low across the Cotswolds, the West Midlands, the West Country and the southern coast of England. Oxfordshire saw only 12 repossessions per 10,000 households in the second half of 2011 – 20% lower than the national average.

The M62 corridor and the north-east dominate the list of postcodes with the highest number of repossessions. Chester, with 53 court-ordered repossessions per 10,000 households (over three times the national average), saw the highest number of court-ordered repossessions in England and Wales. Completing the top three are Oldham, with 27 per 10,000, and Durham with 26 per 10,000.

Affluent southern postcodes – with more wealthy retirees and lower rates of public sector employment – dominate the list of areas with the lowest number of repossessions. 8 of the 10 postcode areas with the lowest number of repossessions were in the south. Levels were lowest in Galashiels, Northumberland, where there was only a single repossession per 10,000 households. Also in the list was the City of London, with only three repossessions per 10,000 households. Conversely, seven of the 10 postcode areas with the highest number of repossessions were in the north of England.

“Spending cuts, negative real wage growth, falling house prices and public sector unemployment have hit the north much harder than the south,” said Sexton. “This has opened up a gaping geographical divide in repossessions levels. With local economies in the north declining faster than their southern counterparts, proportionally more northern borrowers have struggled to keep up with their mortgage repayments, and banks have been forced to repossess more homes. The South and South East, with a bigger proportion of the workforce employed in the private sector, haven’t been left as groggy by the economic blows dealt by the government’s austerity programme.”

There are two notable exceptions to this broad north-south trend. First are areas populated by a high number of wealthy retirees. These ‘affluent grey’ areas tend to have lower numbers of repossessions. In Herefordshire, which has eight times the national average of affluent greys, repossessions are 20% lower than the national average. This has helped Herefordshire buck the broad regional trend of higher than average repossessions. Harrogate, in North Yorkshire, which has three times the average number of ‘affluent greys’, saw only 11 repossessions per 10,000 households, despite it being surrounded by areas where repossessions were significantly above the national average.

The second exception to the trend is parts of east London, parts of Essex and Kent, and south Wales. Despite being in the ‘south’ of their respective countries, their local economies have fared poorly compared to the regional economy, so typically have higher unemployment and are less affluent. Court-ordered repossessions in Romford and Dagenham were 87% higher than the national average; while in the Medway area of Kent they were 60% higher. Repossessions in south Wales were significantly higher than in central Wales. In the Cardiff area, repossessions were 73% higher than the national average.

Sexton added: “Repossessions levels can vary wildly, even within a confined geographical space, thanks to local disparities in affluence and employment rates. Particularly in larger cities, there are can be pockets of wealthy borrowers close to council estates. We’re seeing a broader trend of less affluent, higher risk borrowers gravitating towards the city centre, with wealthy homeowners moving into the leafy suburbs.

“London is a slightly different beast. It is the most pronounced example of how repossessions can vary locally. It has wealthy enclaves, like the City and Canary Wharf on the doorstep of poorer areas like Tower Hamlets and Dagenham.”