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House prices have risen by as much as £144,000 in cities that bottomed out in 2009 but as affordability bites the growth story is elsewhere
London, 20 February 2015 – The impetus behind continuing UK house price growth is shifting towards cities like Liverpool, Sheffield and Glasgow, which bottomed out only two years ago, away from the cities that started to recover in 2009 but have since slowed due to pressures on affordability.
Hometrack has revealed in its latest UK Cities House Price Index that over the last six years, London and Oxford have experienced house price growth of 55.2% and 42.1% respectively since the trough. However affordability pressures will limit growth in the medium term with both cities registering over 12 times the price to earnings ratios, almost twice the UK average of 6.3 times.
By contrast in cities that only started their recovery two years ago such as Edinburgh (10.7%), Leeds (10.1%), Newcastle (8%) and Glasgow (6.3%), house prices are averaging between three and six times the average earnings.
There are 14 UK cities in total that have been recording house price growth since 2009, but the length of the recovery does not provide a guide to the level of house price growth. While London has seen the average house value increase by 55% or £144,000, the rebound in house prices in Manchester and Birmingham have been just over 10% or £12,500 over the same period.
The six cities that have been recovering for the last two-three years have recorded an average increase of just 9% or £11,000 led by Belfast and Edinburgh. The weakest growth has been seen in Glasgow with average prices up 6.3% or £6,300 since July 2012.
Richard Donnell, Director of Research at residential analysts Hometrack, said: “A focus on average UK house price movements masks critical trends at a city and sub-regional level. This is important for both businesses operating in the housing market and policy makers trying to address the challenges of growing housing supply.
“House price growth within cities reflects the strength of their local economies and the demand for housing. While Manchester and Birmingham saw prices bottom out in 2009, growth has been more subdued than in other cities where employment growth has been stronger and the influence of the London economy has been greater.
“Elsewhere house prices continue to rise off a low base as pent-up demand returns to the market supported by record low mortgage rates, an improving economic outlook and rising earnings. Existing homeowners remain are reluctant to put their homes on the market, creating scarcity and keeping an upward pressure on prices.
“The outlook for 2015 is a balance between the scale of the affordability driven slowdown in the high value, high growth markets and the continued recovery in lower value markets.”
Cities that only started to recover two years ago off a low base, such as Liverpool, Sheffield and Glasgow will now drive future house price growth where housing affordability is greatest
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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