For much of the past two decades, the UK housing market has been dominated by London and the South East. Strong international demand, limited supply and sustained economic growth helped southern property values significantly outperform much of the rest of the country.
However, recent housing data suggests the balance may be shifting.
Across several northern regions, house prices are growing faster than in many southern markets, while rental yields and affordability remain significantly stronger. As the market adjusts to higher interest rates and tighter affordability, investors are increasingly looking beyond traditional southern hotspots.
Northern regions leading recent price growth
Recent data from the UK House Price Index shows that northern regions are currently delivering some of the strongest price growth in the country.
The North East recorded annual house price growth of around 4.6% in late 2025, the highest of any English region, while London saw negative annual growth of around -1% during the same period.
Earlier in 2025 the trend was even more pronounced, with the North East recording annual growth of over 7% while London saw growth of less than 1%, highlighting the widening regional performance gap.
Overall, the average UK property price sits at roughly £270,000, while the average property value in England is around £292,000, according to recent Land Registry figures.
While southern markets remain the most expensive in the country, price momentum is increasingly being driven by more affordable regions.
Affordability continues to favour the North
One of the most significant structural advantages for northern property markets is affordability.
Property prices in many northern cities remain dramatically lower than in London and the surrounding commuter belt. In London, the average property price is estimated to exceed £530,000, while many northern cities have average values closer to £200,000–£250,000.
This difference has a major impact on buyer demand.
Lower purchase prices reduce deposit requirements and mortgage payments, making northern markets far more accessible to both first-time buyers and investors.
In contrast, affordability constraints remain one of the biggest barriers to home ownership in the South, particularly in London where tenants already spend an average of over 40% of their income on rent.
Stronger rental yields attracting investors
For investors focused on income, the North also continues to offer significantly stronger rental yields.
Across the UK, typical rental yields vary considerably by region. Recent market data suggests:
- North West average yields: ~5.9%
- Yorkshire & Humber: ~5.4%
- North East: ~5.2%
- London: ~4.7%
- South East: ~4.4%
At a city level, some northern markets deliver even stronger returns. Recent buy-to-let data suggests gross yields of:
- Manchester: ~5.4%
- Leeds: ~5.1%
- Liverpool: ~5.8%
compared with around 4.4% in London.
This yield gap largely reflects the relationship between property prices and rents. While rents have increased nationwide, the much higher purchase prices in southern markets compress investor returns.
Interest rates are changing investor behaviour
The shift in investor focus towards northern markets also reflects the broader economic environment.
During the era of ultra-low interest rates, many investors prioritised long-term capital growth over rental yield. London property benefited significantly from this strategy.
However, higher borrowing costs have changed that equation.
With mortgage rates remaining elevated compared with the previous decade, investors are increasingly prioritising cash flow and yield resilience rather than relying solely on future capital appreciation.
Markets where rental income more comfortably covers mortgage costs and operating expenses are therefore becoming more attractive.
Supply pressures supporting rental demand
The UK rental market continues to experience significant demand pressures.
Limited housing supply combined with population growth and affordability challenges in the sales market has kept demand for rental properties high across many cities.
At the same time, regulatory and tax changes have encouraged some landlords to exit the private rented sector, tightening supply in certain areas.
When rental supply tightens while demand remains strong, rents tend to remain resilient -particularly in cities with strong employment bases and growing populations.
Economic growth in regional cities
Northern cities have also benefited from significant economic transformation over the past decade.
Cities such as Manchester, Leeds and Liverpool have seen major regeneration, expanding professional employment sectors and large student populations. These factors support long-term rental demand and housing market stability.
Infrastructure investment, expanding digital and media sectors, and strong university ecosystems have helped position many northern cities as major regional economic hubs.
In addition, the growth of hybrid and remote working has reduced the need for many professionals to live close to London, potentially supporting demand in more affordable regional cities.
A narrowing regional divide
None of this suggests that London and the South East are losing their long-term importance in the UK housing market.
The capital remains one of the world’s most globally recognised property markets and has historically delivered strong long-term capital growth.
However, current data indicates that the performance gap between North and South may be narrowing.
Northern regions offer:
- Lower entry prices
- Stronger rental yields
- Faster recent price growth in some areas
- Greater affordability for buyers and tenants
At the same time, higher purchase prices and affordability constraints continue to limit momentum in several southern markets.
What it means for investors
For investors analysing today’s market, the key takeaway is that regional fundamentals are becoming increasingly important.
Affordability, rental demand, employment growth and supply constraints all play a role in shaping long-term property performance.
While London and the South East remain major pillars of the UK housing market, current data suggests that many northern cities are becoming increasingly attractive from both an income and value perspective.
As the property market continues to adjust to a higher interest rate environment, investors may increasingly look beyond traditional hotspots and towards regional cities where the balance between price, yield and demand appears more favourable.
Tom Cooper
With over a decade of experience at Knight Knox, Tom Cooper plays a key role in driving our sales strategy and team success. As Sales Manager, he brings a wealth of industry knowledge and a genuine passion for building meaningful relationships with clients around the globe.
Tom thrives on connecting with people from diverse backgrounds, valuing every opportunity to learn from different cultures and perspectives. His approach is rooted in trust, communication, and long-term partnership.
