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Eleven cities grow and seven cities slow as disparity in house price inflation narrows
London, 23 January 2015 – UK house prices increased by 0.4% in December to 8.3% year-on-year (4.5% in 2013) but the rate of growth has plateaued and is set to slow in 2015, residential analyst Hometrack has revealed in its latest UK Cities House Price Index.
While the recovery in UK house prices is spreading, the gap between the best and worst performing cities has narrowed to its lowest level for 15 years (Feb 1999). There are now two distinct groups of cities – those cities that are accelerating off a low base after years of either static or falling prices and those that have enjoyed strong house price recovery over the last two years and where house prices are starting to slow on cooling demand and affordability constraints.
Overall 11 cities registered an acceleration in house price inflation over the second half of 2014, led by Edinburgh, Aberdeen and Glasgow where demand for housing has been boosted post the referendum result. Newcastle, Leicester and Liverpool have also seen the rate of growth continue to rise off a low base in 2014 H2 with house prices in these cities 9%, 2% and 15% below their 2007 levels.
Oxford, London, Cambridge and Bristol have all registered a slowdown in the rate of growth over 2014 H2 off a high, double digit base. Other cities registering a slowdown in the rate of growth include Bournemouth, Belfast and Leeds showing that slower house price growth is more than a solely London phenomenon. Slower growth in housing demand, tougher mortgage checks and affordability factors are behind the slowdown in these cities where house prices have bounced by as much as 55% from their 2009 lows in recent years.
Richard Donnell, Director of Research at residential analysts Hometrack, said: “House price growth at a city level looks set to converge further in the first half of 2015 as high growth markets continue to slow and lower growth markets start to see growth plateau. Pent-up demand has fed back into the market in the last 2 years, supported by record low mortgage rates, but mortgage approvals have weakened in the last five months with a knock on impact on house price growth. Low mortgage rates are making housing look affordable but it is the willingness and ability of households to borrow, against the background of greater mortgage regulation, which will most influence the housing market in 2015.”
It’s a tale of two (distinct groups of) cities- the slowdown in rate of growth is more than just a London phenomenon
The Hometrack UK Cities House Price Index is Not Seasonally Adjusted
NOTE – The definition of London ‘City’ is larger than the London Government Region. The ‘City definition extends further out into London’s travel to work area capturing the commuter areas outside the 33 London Boroughs. The London ‘City’ area covers 44 local authorities and better represents the housing markets that are influenced by the London economy.
About the Hometrack UK Cities House Price Index
The new Hometrack UK Cities House Price index has been designed to provide a granular analysis of housing market trends at a city level – cities are the focus for economic and demographic change as well as a focus for greater cross-area collaboration. The 20 cities in this new house price index cover a land area that is less than 5% of the UK but the cities contain over 40% of the value of UK housing and a similar proportion of all UK jobs. (See notes for more information on the index series.)
NOTES FOR EDITORS
1. Hometrack’s house price indices (HPI) are designed to track, as closely as possible, the performance of UK residential capital values over time. We have a track record of developing and running proprietary, localised, sub-regional house price indices for over a decade. Localised house price indices form a key part of the Hometrack automated valuation model where indexation is a key element of the valuation system. This valuation system is trusted by 4 of the top 5 lenders in the UK.
2. From October 2014, we are publishing a unique index based on 20 UK cities. We will also be producing indexes for the UK, Government Regions and the countries of Scotland, Wales and Northern Ireland. Interactive analysis, further information and FAQs on the index can be found at www.hometrack.com.
3. This new Hometrack UK Cities House Price Index is very different to our historic monthly housing survey which was an aggregation of the views of a large sample of agents and surveyors on key market trends in their local area. The survey has been dis-continued. Selected market metrics from the survey are being calculated from listings data and are available in Hometrack products and services.
4. The geographic definition of a city is based upon Primary Urban Areas – these cover the built up area of a city or a city region. Primary Urban Areas for English cities were defined in a report published by Government entitled The State of the English Cities Volume 1, ODPM, 2006. All cities are based upon amalgamations of single or multiple local authorities. The Primary Urban Area methodology has been applied to major cities across the rest of the UK covering Scotland, Wales and Northern Ireland.
5. Hometrack’s UK Cities House Price Index is created using a repeat sales based methodology drawing upon a large database comprising 100% of recorded sales prices from the Land Registry ‘Price Paid’ dataset and equivalent data from the Registers of Scotland. This price paid data is supplemented by mortgage valuation data.
6. The Hometrack UK Cities House Price Index is weighted according to the volume of private housing stock in each geographic area. The property type weightings are adjusted dynamically over time each quarter as the stock of housing grows, but the absolute changes are small.
7. The primary output of the UK Cities House Price Index build process is a monthly ‘multiplier’, the amount by which house prices have changed over the period based on the available evidence for the relevant geography. This monthly multiplier is used to create an index of house prices.
8. The Hometrack UK Cities House Price Index is revisionary i.e. there are revisions each month as more data comes available as sales are registered and further information becomes available. All UK house price indices are published on a revisionary basis. The scale of monthly revisions tends to be larger for smaller geographies where sales volumes are lower and indices can be more volatile at the leading edge. The historic revisions are minimal for the largest geographies.
9. The series are supplied on a non-seasonally adjusted basis.
10. In order to calculate the average price, the monthly price changes are applied to an average price to create a time series for average house prices from a base date which was in December 2013.
11. All average prices and percentage changes are expressed in nominal terms i.e. not adjusted for inflation.
12. Further information can be found at ww.hometrack.com
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