According to the Nationwide, the average UK house price is only 18% above where it was 10 years ago. On an inflation-adjusted basis, the effect of the Global Financial Crisis means the average UK house price is 11% below its 2007 level.

This has occurred despite a prolonged period of abnormally low interest rates. In August 2007, the average interest rate for a new mortgage was 5.88%. Now, it stands at just 2.04%. Of course, house price averages are misleading.

The Savills Repeat Sales Index uses price-paid data from the Land Registry and Registers of Scotland. Across the country as a whole, it broadly concurs with the Nationwide figures. But it also shows wide regional and local variations in the nominal (non-inflation-adjusted) levels of house price growth reported below.

It suggests that prices in London have risen by 78% on average in the past 10 years. In the North East, though, they have fallen by 9%. The extremes are prices in Hackney, which have risen more than 120%, and Hartlepool, which have fallen by 24%. There is a north-south divide, but the picture is far more nuanced than that.

^{Source: Savills Research using HM Land Registry and Registers of Scotland}

London as an island

Price growth in London has far outstripped areas beyond the M25. Over 10 years, London price growth has essentially been twice that of the South East.

Consequently, London buyers appear to be hitting against the limits of mortgage regulation, with fewer buyers confined to more affluent households, stretching their borrowing to more than four times their household income and buying in areas they would not have considered pre-Global Financial Crisis.

Some urban markets such as Oxford, Cambridge and Brighton have parallels with London, both in terms of the price growth and the affordability issues they now face.

In addition to the usual suspects such as St Albans and Elmbridge, which have always attracted a flow of equity out of the capital, we have also seen prices in lower-value commuter towns such as Slough, Stevenage and Harlow rise 50% in the past decade, as investors and homeowners have looked to stretch their mortgage further.

But the gap between London and its hinterland has widened considerably and has only recently shown any sign of narrowing.

The gap between debt and equity

Moving away from London, the difference between equity-rich and more mortgage-dependent markets has been noticeable.

In Bristol and Bath, 10-year price growth of 48% and 41% respectively has not just been stronger than the average for the South West, but also the South East, while markets such as Gloucester and Great Yarmouth have prices that are no more than 15% higher than they were in 2007.

In the Midlands and the North, markets such as Trafford, Rushcliffe and York are poles apart from Blackpool, Blackburn and Burnley in relative terms, but here the differences are between a price growth of 20 and 30% for the former and net falls of 10 to 20% for the latter.

North of the border, price growth of 28% in Edinburgh has been twice that of Scotland as a whole. Fuelled by its local economy, Aberdeen had price growth of 44% between March 2007 and March 2015, but prices have fallen 9% since then with the oil price, so growth over the 10 years has been 35%.

^{Source: Savills Research using HM Land Registry and Registers of Scotland}

A focus on the future

Short term The market is likely to be largely driven by sentiment with price growth suppressed by political and economic uncertainty. London is expected to be most exposed, given the sheer scale of the financial commitment which a mortgaged house purchase now represents in the capital.

Longer term The cost of mortgage debt will be key even though the UK housing market has become increasingly driven by equity.

When rates rise, we expect a squeeze on affordability. Stress testing of household finances is expected to act as a drag on growth.

Recent evidence gives us clues as to the geographical distribution of that price growth. Those on the first rungs of the housing ladder are likely to want to stretch their money further, particularly in London and increasingly across the south of the country. In many cases, that will push them into the ‘next-most-desirable’ markets, that are more affordable and accessible than their first choice.

Equity generated in the London housing market among older households is likely to continue to be exported into the commuter zone. Across other parts of the country, we expect the legacy of the credit crunch to favour more valuable equity-rich markets, with lower-value areas dependent on the strength of the local economy.