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February saw a notable and unseasonal acceleration in house price growth across UK cities according to the latest Hometrack UK Cities House Price Index. Overall city level house price inflation increased to 11.0% up from 8.1% a year ago, the highest annual rate of growth for almost 18 months.
Portsmouth, Nottingham and Birmingham recorded the highest rate of annual house price growth for over 10 years while Leeds and Glasgow have seen the highest rate for over 8 years. All these cities have experienced sustained house price inflation since 2013 largely due to the improving economic conditions, rising earnings and employment levels with affordability boosted by low mortgage rates.
London, Bristol, Oxford and Cambridge all continue to record double digit rates of house price inflation. However, there are early signs that the rate of growth is starting to slow. All these cities recorded a small drop in the headline rate of growth over February as affordability and sentiment factors start to impact pricing levels. In fact, a closer analysis of the 46 local authorities that cover the London City area shows the average growth rate in the last quarter is approaching half the rate recorded over the last 12 months.
Richard Donnell, Insight Director at Hometrack says:
"There has been a notable and unseasonal acceleration in city level house price growth in the last three months. 16 of the 20 cities covered by our index are registering an annual rate of house price growth that is higher than 12 months ago. As the housing recovery spreads some regional cities are recording their highest growth rates for over a decade. Four cities have seen the rate of growth slow, with Aberdeen and Belfast hardest hit. Belfast in particular has lost momentum where a modest recovery appears to have stalled with house prices still 45% down on their 2007 levels”
“While there is a lot of focus on the impact of investors buying ahead of the April stamp duty deadline the vast majority of demand for housing comes from existing homeowners who account for 80% of sales. The pick-up in growth across the UK cities has more to do with a lack of supply and increased demand on the back of the improving economic outlook and low mortgage rates.”
“Our latest index results show that there are early signs of a slowdown in the double digit growth cities of London, Oxford, Cambridge and Bristol as affordability pressures constrain demand, buyers become increasingly price sensitive. Policy changes affecting investors will bite harder over the course of the year impacting volumes and the level of price appreciation.”
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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