hometrack

Contact Us

What are you interested in?
Valuations
Market Intelligence
Risk Analytics

Cancel

Cancel

Confirming payment details

Payment processing

Login or Sign up

Use the form below to login to your account. If you have problems contact the helpdesk.

Cancel
Cancel

Forgot password

Enter your email address and we will send you a password reset link or need more help?

Cancel

February 2016 - City level house price inflation increased to 11.0% - the highest rate for 18 months.

On 24 March, 2016
  • City level house price inflation increased to 11.0% - the highest rate for 18 months.
  • There are 5 regional cities where the recent pick-up in growth has been strongest – the current rate of growth is the highest for up to 11 years.
  • The four double digit, high growth cities all recorded a small drop in the headline rate of growth.

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.

City house price growth ticks higher again

City level house price inflation increased to 11.0% in February, up from 8.1% a year ago and the highest annual rate of growth for almost 18 months.

Table 1- UK 20 city index summary, February 2016

undefined

Source: Hometrack House Price Indices

Unseasonally strong growth

There has been a notable and unseasonal acceleration in house price growth in the last three months across most large regional cities thanks, in part, to a temporary increase in demand from those looking to beat the stamp duty increase for second homes from April onwards.

Not all down to investor rush

Increased demand from existing home owners in cities where the economic recovery has been less pronounced is an important underlying theme given that the majority of housing sales (80%) continue be driven by home owners.

Fig. 1 - 20 cities index %yoy and %mom

undefined

Source: Hometrack House Price Indices

City Level Summary, February 2016
Source: Hometrack House Price Indices

Growth rate higher in 16 of the 20 cities

16 of the 20 cities covered by the index have registered an increase in the annual rate of house price growth increase in the last year. Some regional cities are recording their highest growth rates for over a decade as the recovery in house prices gains momentum. Four cities have seen the rate of growth slow with the greatest slowdown in Aberdeen and a loss of momentum in Belfast where a modest recovery appears to have stalled with house prices still 45% down on their 2007 levels.

Five regional cities stand out for pick up in growth

Five cities stand out based on a material increase I the rate of house price growth in the last year. These are led by Portsmouth and Leeds where house prices are rising much faster than earnings at between 8% and 9% per annum – see table 2.

Table 2- Top 5 recovery cities
Source: Hometrack House Price Indices
Fig. 2 - HPI current and 12 months ago
Source: Hometrack House Price Indices

Portsmouth, Nottingham and Birmingham are recording the highest rates of annual house price growth for over 10 years while Leeds and Glasgow have the highest growth rates for over 8 years. All these cities have seen a continued pick up in house price growth since 2013 on economic growth, an improving employment outlook, earnings growth and low mortgage rates.

There are no consistent patterns as to the types of property driving higher growth in these five cities. In Portsmouth detached homes are rising at twice the rate of the city which is the same trend, with a lesser degree of magnitude, in Nottingham. In Birmingham the highest growth rate is being recorded for flats (11.3% against 7.0% for the city) while in Leeds terraced houses (11%) are recording the highest growth compared to the city (7.8%).

High growth cities starting to slow

The four high growth cities of London, Bristol, Oxford and Cambridge continue to record double digit rates of house price inflation but there are 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 impact pricing levels

Fig 3 - Early signs of growth turning in London
Fig 3 - Early signs of growth turning in London
Hometrack House Price Indices

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, on average, over the last 12 months. Slower growth is inevitable in these markets as affordability pressures constrain demand.

Near term prospects

While prices are moving higher, the very latest data on residential transactions from HMRC shows non-seasonally adjusted sales in February running 10% lower than sales over 2015H2. A similar pattern of lower lending volumes is revealed in the latest CML estimates for overall mortgage lending. It remains to be seen the extent to which the Referendum vote and policy changes will impact market volumes and price growth at city level. A change in the balance of house price growth is set to emerge in 2016 with further price growth to come in regional cities. In contrast, we expect growth in London to slow in the face of more price sensitive demand and where the implications of a Brexit vote and the impact of policies targeted at investors will have the greatest impact over 2016.

February 2016 - City level house price inflation increased to 11.0% - the highest rate for 18 months.
Download the PDF

Related articles

October 2016 - London breaks 14x house price to earnings ratio 24 November, 2016

City level house price growth is holding steady at 8.4%. This month we reveal an updated view on city level affordability. This finds that after an 86% uplift in house prices since 2009, the price to earnings ratio in London now sits above 14x with Oxford and Cambridge close behind. Other cities are at or below their long run average. Read the Report to find out what this means for city level house price inflation.

September 2016 - London records lowest quarterly growth for 20 months 20 October, 2016

City level house price growth is running at 8.5% but growth in London has slowed rapidly in the last quarter to the lowest level of quarterly growth for 20 months. Eleven cities are registering higher growth than at the start of 2016 while 9 are slowing.

August 2016 - City level house price growth running at 8.2% 23 September, 2016

The pace of city level house price inflation is slowing with growth in the year to August 2016 running at 8.2%. The 20 city index recorded its lowest level of quarterly growth (1.9%) for 6 months as a seasonal lull in market activity and weaker demand post Brexit and the March Stamp Duty change reduce the upward momentum of house price growth

July 2016 - 20 city house price growth starting to slow 26 August, 2016

The annual rate of house price inflation across the 20 cities has started to slow after 12 successive months of rising house price inflation A marked slowdown in the rate of growth over the last three months in London is behind the shift in momentum. However, house price growth in large regional cities outside southern England, continues to hold steady at 7-8% per annum with no sign of an imminent slowdown. Aberdeen is also registering a slower rate of price falls compared to recent months.