House prices in mainly rural areas have increased faster than in cities over the past five years, Nationwide Building Society's latest figures reveal.
In predominantly rural regions, property values have surged by 22% since 2018, outstripping the 17% rise seen in urban zones. Nationwide's senior economist, Andrew Harvey, said: "Our latest analysis suggests that average house price growth in local authorities classified as predominately rural has continued to outpace those of other areas."
He detailed: "Between December 2018 and December 2023, average prices in predominately rural areas increased by 22%, compared with 17% in predominately urban areas. Local authorities classified as 'urban with significant rural' saw price growth of 19% over the same period."
However, he pointed out: "Average house prices across both urban and rural areas declined a little overall during 2023, which reflects the rise in borrowing costs, which have added to affordability pressures." The research used the Office for National Statistics' classifications to distinguish between different types of local authorities.
In local authorities classed as "predominantly rural", more than half of the population live either in rural settlements or market towns. In authorities classed as "urban with significant rural", between 26% and 49% of the population live in either rural villages or market towns, Mr Harvey said.
In areas classified as "predominantly urban", 75% or more of the population reside in towns or cities, according to Mr Harvey. Out of 349 local authorities in Britain, he stated that 212 are categorised as predominantly urban, 89 as predominantly rural, while the remaining 48 are considered urban with significant rural areas.
Mr Harvey added: "Increased demand for properties in rural areas over recent years has been part of the 'race for space' seen during the pandemic. However, it is actually rural semi-detached properties that have seen the strongest price growth between December 2018 and December 2023, with average prices increasing by 24%."
He clarified that Scottish local authorities were not included in these figures due to data availability. This report was published alongside an analysis by property firm Hamptons, which revealed that just under a third (32%) of new homes sold across England and Wales last year were purchased before they were built, marking the lowest proportion since 2013.
Hamptons noted that higher mortgage rates have reversed trends set during the coronavirus pandemic, with larger homes experiencing particularly sharp declines in "off-plan" sales. Only 22% of detached homes and 31% of semi-detached homes were sold before they were built, recording an eight and 10 percentage point drop respectively between 2022 and 2023.
It's estimated that 45% of flats were sold off-plan last year, a figure which was down by five percentage points. David Fell, the lead analyst at Hamptons, has highlighted the financial challenges faced by housebuilders: "In what's a cash-intensive business, house builders typically borrow to build homes, paying it back when they're sold."
He pointed out that with the trend of homes being sold only after completion, developers are shouldering loans for longer periods and at steeper interest rates. Fell also noted the impact of higher mortgage rates on buyers: "Higher mortgage rates have introduced a new barrier in the form of unaffordable repayments and have pushed buyers towards smaller, more affordable homes that are often second-hand."
The index he refers to draws on property transaction data from both Hamptons' parent company, the Connells Group, and figures from the Land Registry.