Top 10 areas most immune to a house price crash

With house prices falling, and property asking prices also dropping, you may be wondering where to buy to avoid a house price crash.

Kensington and Chelsea, Swansea and Oxford have been revealed as some of the areas most immune to a house price crash this year. If you're wondering whether now is a good time to buy a house, considering how to recession proof your purchase may well be high on the agenda.

Buying agent Garrington Property Finders analysed nearly 100 locations to identify the property strongholds with maximum price stability, plus the weak spots set to offer the biggest discounts to buyers in 2023.

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While wealthy London boroughs and regional cities like Swansea, Oxford and York should be most insulated from house price falls, Milton Keynes and Crawley face the highest risk of a correction.

“The property market is going through a rapid transition, and the ripple effects will intensify over the coming months as rising interest rates feed through into homeowners’ monthly mortgage payments,” said Jonathan Hopper, chief executive of Garrington Property Finders.

“But our research indicates some markets will be affected much more than others. Prime London postcodes, as well as several popular university cities, are the most likely to escape relatively unscathed.”

House price growth slowed to a standstill in the final few months of 2022, and many property experts are forecasting house price falls this year. Lloyds expects prices to drop 8%, while Nationwide and Halifax think they will fall by 5%.

Top 10 strongholds most resistant to house price falls

Garrington examined a range of factors when ranking 96 local authorities in England and Wales according to their resilience to rising interest rates and the likely impact on property prices.

For example, it looked at the proportion of residents that have a mortgage on their home. A lower percentage means they would be less affected by a spike in interest rates. Just one in eight residents of the London borough of Kensington and Chelsea has a mortgage on their home.

More than a quarter (27.6%) of households in Kensington and Chelsea own their home outright, and levels of outstanding mortgage debt are exceptionally low, at just 7.3% of the total value of homes there.

Property in the borough – which includes two homes owned by prime minister Rishi Sunak – is the UK’s most expensive, with a median price of £1.4m in the year to June 2022, according to official figures.

Meanwhile, first-time buyers account for just 0.1% of Kensington & Chelsea residents. First-time buyers typically have few savings to fall back on and are more exposed to interest rate rises as mortgage payments swallow up a big chunk of their earnings. This is another reason why the wealthy borough has taken first place as the country’s most recession-proof property market.

Westminster and Camden also score well in terms of having a low percentage of first-time buyers and a low debt-to-equity ratio of homes in the area.

The historic university cities of Oxford, York, Cambridge and Exeter also feature in the top 10. Seven of the 10 areas have recorded positive annual house price growth to November 2022.

Top 10 weak spots most likely to see prices fall

Things are less rosy at the other end of the scale, with Milton Keynes and Crawley facing the highest risk of a price correction.

Almost a third (32.1%) of households in the Sussex town of Crawley have a mortgage on their home and the total debt-to-equity ratio is three times higher than Kensington and Chelsea’s at 21.4%.

First-time buyers account for 7.1% of households in Crawley. According to Nationwide, the average first-time buyer is already spending 39% of their take-home pay on a mortgage, close to the levels seen in the run-up to the 2008 financial crisis. Some homeowners could be forced into selling at a discount if they struggle to afford their mortgage when their interest rate rises.

First-time buyers account for one in 10 homeowners (10.2%) in Dartford in Kent, and 8% in Milton Keynes.

Areas at the bottom of the table have much higher levels of mortgage debt as a percentage of the value of their homes.

Many of these markets also saw very rapid price rises following the pandemic – average prices in Milton Keynes jumped by 17.4% in the year to the end of November 2022 – which Garrington says could increase the likelihood of a correction.

“Our research suggests that towns which saw very rapid post-pandemic price rises and lots of first-time buyers, such as Crawley and Milton Keynes, could be set for sharper price falls in 2023,” said Hopper. “For tactical buyers looking to secure a big discount, these more exposed areas could throw up some strong buying opportunities this year.”