North Devon's housing market - where are we now?

A number of recent announcements have been made which influence the all-important housing market. 

These include the Chancellor’s Spending Review where she allocated £39 billion towards increased social and affordable housing delivery. 

Also, we have had the first draft of the new “Devon” Economic Plan  highlights the need to pick up the pace of delivery. 

Then there was a surprise announcement about a potential new town in Mid Devon following a just released national report that this area has been identified as one of the top 30 locations in the UK where a major settlement could be built. 

And finally, we have yet more changes to the planning rules. 

To try and unpack all this triggers one of my routine updates on this complex but critical market.

The latest official statistics tell us that an average house price in North Devon was £297,000 in March 2025. This is a rise of 8.1% from March 2024. Compare this with the average across the South West where the mean price is £311,000. The national average is £271,000. 

Hidden behind these numbers, there are also interesting differences. Semi-detached properties on our patch increased in value over 12 months by 9.8% while the average price for flats increased by 6.0%. Detached houses averaged £444,000. Surprisingly monthly average rents were £828 per month up 6.6% from last year but still well below the average for the South West and England both being above £1,000 a month and rising. The mean being £1,335 per month up 7.4%.

Apologies for those, like me, who get easily bored by statistics. In housing, however, it is the only way to tell the story and is essential information for those considering buying or selling, also for house builders to plan ahead and for banks and mortgage providers to be able to judge how their investments will perform.

It also triggers other questions which are equally important, such as are we building enough new homes to satisfy demand? Are there enough affordable homes? Are first-time buyers able to get on the housing ladder? 

How much are we spending on mortgages as a percentage of our overall income?

All of this information helps to determine whether we can accommodate key workers, help to avoid our next generation departing the region, judge how vibrant our hospitality businesses will be and how much footfall there is in our high streets.

So let me try and give some insight into these challenging questions.

We know we are not building enough new homes because the government says so. They want 1.5 million in the lifetime of this parliament. I am not alone in predicting that this will be a defining issue at the next general election when the promise to deliver this number will be exposed as having been totally unrealistic and undeliverable. 

It has, however, caused a huge “Trump-like” earthquake by blowing apart housing delivery numbers and forcing both our local planning authorities to come up with an increasing number of housing sites. Tricky stuff because new housing needs adequate infrastructure and services like schools, it needs labour and materials to deliver it and it needs broad buy-in from the local community. None of these can be switched on like a tap.

The house builders' response to this is predictable. They will continue to build at their own pace and will ensure that they make money whilst doing so. 

The government have been trying to encourage on the one hand by improving the planning system but continue to disrupt with the other. Take one example. Nobody argues about the long-term need for safe, energy-efficient housing but sudden changes, such as requiring air-source heat pumps (instead of gas fired boilers) and now a requirement that all new homes will be fitted with solar panels as standard within two years, inevitably impacts on price. 

It is estimated that solar panels alone will add £3,500 to the cost of building a semi-detached or terrace house and around £4,000 for a detached house. This of course is another part of the government’s dash for net zero and is seen as vital if we are to decarbonise the electric grid by 2027 and reduce energy bills by up to £300. One estimate is that a three-bedroom semi could save £1,000 per year.

House prices have also been affected by the recent increases in stamp duty. Since the 1st of April first-time buyers have had to pay stamp duty on properties above £300,000 in value, down from £425,000. For all other buyers the duty now kicks in at £125,000, down from £250,000. This inevitably led to a surge in transactions as the cliff-edge got closer. Values increased in March by around 6.5%. Since then house prices have been subdued with a fall of around 6% month on month, the largest decline since August 2023. 

This is unfortunate because traditionally the housing market is busier during the spring and summer with a greater motivation to move. One recent report suggests that house sellers are agreeing to an average £16,000 reduction below the asking price. Certainly many of the local estate agents are reporting lower enquiries and reduced views.

Add into this the negative impact of concerns over the domestic and global economy, the obstinate impact of interest rates which are too high, inflation that won’t go away and now yet more international conflict which could destabilise our export ambitions and is already affecting the prices at the petrol pumps. None of this does anything to boost consumer confidence.

Another clue to these puzzles is an interesting trend which is a hang-over from the pandemic lockdowns being the continuing desire by many families to leave cities and large urban centres. As a consequence the cost of homes in rural areas has risen twice as fast as those in towns and cities. 

This is particularly noticeable in the South West. Even this, however, may be changing, with some evidence emerging that “the Silver City Slickers” are finding that poor rural public transport, waiting times for GPs and the best hospitals being in big cities is taking the gloss off retirement to a rural idyll which is increasingly out of touch. They are therefore beginning to drift back to the bright lights and more vibrant night culture of the cities.

Another area of better news is the cost of mortgages. Lenders expect demand to level off in the coming months. This has triggered a price war between banks and building societies as they seek to compete for a shrinking market. They have priced in a further 0.25% rate cut by the Bank of England to the base rate. Barclays have recently become the latest lender to reduce their rate below 4% as this price war hots up. They are offering two and five-year fixed rates at 3.99% for a borrower with a 40% deposit. Coventry Building Society by contrast is offering 3.89% with a 35% deposit.

Perhaps the scariest trend is how, particularly first time buyers, are getting onto the housing ladder. Many are taking out longer mortgages. Since 2023 this has increased dramatically. 20 years ago the average mortgage length was 25 years. By 2022 this had increased to 29 years. The average first-time buyer mortgage today is now 31 years. Evidence also suggests that borrowing over 40 years is being encouraged. Even  with these long terms, however, repayments are still taking up a higher proportion of income than at any point since the peak of the global financial crisis in 2008. About 23% of monthly income is being spent servicing a mortgage. This compares with 17%  five years ago and 24% in 2008. Of course there is still the bank of mum and dad to fall back on, this provides a major source for new homebuyers.

Affordability generally remains an issue. The average house price across the South West is 10.35 times mean earnings, compared with the national average of 9.35%. In some pockets such as the South Hams this ratio is up to 14.48 posing significant challenges for local buyers.

Perhaps a helpful initiative is that the Financial Conduct Authority is making it easier for borrowers to switch lenders and change their packages without onerous affordability checks. Currently 90% of homeowners stick with their existing lenders when deals end. This change will save money as the need for mortgage brokers is reduced. This will also make lenders even more competitive.

So will the new money from the Chancellor change things? Sadly, not any time soon. Back to my point about turning the tap on. This will slightly increase flows to a trickle but it could be five years before a noticeable change in pace happens on the ground. Disappointing, as the thinking is sound and bodies like Homes England are becoming more effective.

So where does this leave us? My view is that buying a house is more important to many than global issues. Most therefore will largely shrug off the subdued outlook for the wider economy. I anticipate that prices will rise by the end of this year by around 3.5% and by a further 4.5% in 2026. I base this on evidence of a pick up in demand following around five months in a row of declines in enquiries from new buyers — 28% down in May than in April. The combination of continuing falling supply, cheaper mortgages and a slow rise in demand will keep prices moving upwards.

Sadly, my predictions regarding the rental market are gloomy. Landlords and those in the buy-to-let market are fewer than at anytime since before the financial crisis, largely due to higher taxes, higher regulations and increased security for tenants. 

Whether these changes are warranted or not the simple fact is that this market is grinding to a halt. Inevitably therefore rents are accelerating to unaffordable levels, driven up by insatiable demand.

This is a troubling story to try and tell. This is one area of the economy where only good government policies can turn things around.