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Inflated house prices in London commuter belt could bear Brexit brunt

The gap between the price of a house compared to a flat in some parts of the country has skyrocketed in recent years, and new speculation suggests these locations may be the hardest hit in a no-deal Brexit.

In the UK, the average difference between the value of a detached house compared to a flat is 50.6% in a given area, and this has risen by around 24.2% over the last five years according to reports from property investment company British Pearl.

However, across the country, the price disparity varies significantly, and areas where the gap is the highest could be the most vulnerable to future knocks in the market, according to the research.

As the debate rages on over what impact a possible no-deal Brexit might have on the country’s property market, with Bank of England director Mark Carney adding fuel to the flames last week, the latest figures have been interpreted as a particular risk to over-inflated house prices in London’s commuter belt.

Upsizers have pushed up prices on London’s outskirts

This is because, compared to the national average, some of these areas have seen a colossal gap spread between the price of a detached house and the price of a flat, as more people have turned their backs on London’s expensive property market to get more for their money on the outskirts – which has in turn hugely inflated house prices in these areas. As a result of the demand for larger properties in the commuter belt rising, value increases have been significantly higher than for flats in the same locations.

Stevenage is one example used in the research, where detached house prices have soared to 197% higher than the average flat there (at a ratio of £553,697 against £186,422) – an increase of a huge 68.2% over the past five years.

Watford and Hastings were also high on the list of places with widening gaps between property types, with a difference of 201.4% in Watford (a 53.2% rise) and a disparity of 184.7% in Hastings (a 63% increase).

Buying in the right area to avoid risks

“Parts of the UK property market have made considerable gains and the relative value of homes in different price bands now poses a serious risk to homeowners and investors in the run-up to March 2019,” said James Newbery, investment manager at British Pearl.

“However, the study also shows being diligent about the area you buy in can help you avoid these increased risks, with huge variations being seen in this polarisation measure across the country.”

Elsewhere in the country, the gap has grown at a much slower rate. For example, in Doncaster the difference between the price of a detached house and a flat is currently 140.6%, but this has only risen by 18.4% over the past five years, while in Stoke-on-Trent the gap is now 131.2% after growing 26.9% over the same period.

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