Population growth to power house prices

LONDON and the South East of England will continue to outstrip the rest of the country in economic prosperity - and the cost of property - because of a population explosion, it has been claimed.

Figures from the Office for National Statistics show that over the last decade, house prices have increased by an average 238% in the 10 local authorities with the fastest growing populations. In the same period, prices rose by an average 195% across the country.

In contrast, the 10 areas that have suffered the most depopulation have seen more sluggish growth. Those areas have, however, still seen average rises of 123%.

According to the Halifax, which conducted the research, the data reveals a correlation between population levels and property prices. By this measure, any future increase in population, as would happen with John Prescott's plans for 128,000 new homes in the Thames Gateway by 2016, would mean continuing above-average house price rises for London and the South East.

The Halifax found that 313 local authorities in Britain have seen population increases over the last ten years, while 93 authorities have recorded a decline. At the same time 54 local authorities have experienced a population increase of more than 10% during the last ten years. The majority of these authorities are in the south and east of England.

The bank found that eight out of 10 of the top increases in population in the country were recorded in the Greater London area. The City of London saw the highest percentage increase, up 51% between 1993 and 2003. Over the period, the average property price rose by 234%.

The local authority with the sharpest rise in residents was Westminster, home to the Houses of Parliament, the West End and blue-chip residential areas such as Mayfair and Marylebone. The population of the borough increased by 45,100, while the average house price rose by 316%. Other London boroughs in the top 10 were Kensington & Chelsea, Tower Hamlets and Hammersmith & Fulham.

Regionally, Greater London has seen the fastest growth in population with a 7.9% increase over the past 10 years, a rise of 543,400. The eastern region, up 6.0%, follows the capital, with the South West third.

Populations have fallen by 2.1% in the North East and by 0.7% in Scotland and by 0.6% in the North West over the past ten years.

Outside the capital, East Cambridgeshire and Milton Keynes saw house prices rising by 208% and 211% respectively. Other top areas of growth were in Northamptonshire and Derbyshire.

Eleven local authorities have seen their population decline by more than 5% over the past ten years. Four of these authorities are in Scotland (Western Isles, Inverclyde, Dundee City, Glasgow City), three are in the North West (Liverpool, Blackpool, Salford) and two in the North East (Easington and Newcastle-upon-Tyne). By number, the largest decline in population during the past ten years has been in Glasgow City (39,600). Liverpool (29,500) and Kingston-upon-Hull (17,100) saw the next biggest falls. Glasgow saw house prices rise 99% over the decade, Liverpool 156% and Kingston-upon-Hull 113%.

Areas with the highest population growth are not necessarily the areas with the strongest economic growth, the bank says. Inner London boroughs, such as Tower Hamlets and Camden, are in the top ten areas for population growth but have above average claimant count unemployment rates.

There is also no clear link between falling population and rising unemployment. The ten areas with the largest falls in population in the past ten years have all seen a fall in their claimant count over this period. Of this ten, Newcastle-upon-Tyne and Easington - both in the North East - have seen above average falls in their respective claimant count levels of 71%.

Tim Crawford, Group Economist at Halifax, said: 'London dominates the list of areas in Britain that have seen the fastest population growth over the past ten years, reflecting the capital's ongoing economic prosperity. Major cities in northern Britain, such as Glasgow, Liverpool, Newcastle and Hull, have recorded population declines, highlighting the ongoing north/south divide.'