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City level house price growth accelerating: Annual house price inflation across UK Cities is rising once again on the back of low mortgage rates, tight supply and a 32% increase in transactions volumes since April 2015.
City level house price growth accelerating
City level house price inflation is running at 8.5%, up from 7.2% in April (figure 1). House prices are up by 4.3% in the last 3 months – the highest quarterly growth rate for 11 years.
All cities with the exception of Aberdeen are registering house growth ahead of growth in average earnings (currently 2.4%). The highest year on year growth is 10.9% in Cambridge followed by Oxford, London and Bristol. The lowest growth rate is being registered in Aberdeen (-0.7%) where the weakness in the oil price is impacting the local economy and demand for housing. Other cities with below average house price growth are Newcastle, Liverpool and Sheffield where annual growth is running between 2.5% and 4.5%.
Table 1 - UK 20 city index summary, July 2015
Source: Hometrack House Price Indices
There is room for further catch-up in house prices. Nine of the twenty cities still have average prices that are lower than 2007 levels although this gap is narrowing rapidly. The relative performance of house prices since 2007 remains wide and reflects different economic and demand side drivers of house prices.
Average prices in London are 40% higher than in 2007 and 14% higher in Bristol. Cities such as Edinburgh and Glasgow have registered a resurgence in growth more recently post the Scottish referendum although average prices remain 2% and 11% below their peak.
City level house prices register the highest quarterly growth for the last 11 years
More growth to come in near term
Low mortgage rates, economic growth and rising earnings will continue to stimulate demand and put an upward push on house prices across most cities. As an international city, London is out on its own setting new highs for prices and (un)affordability. How long this can be sustained is down to the prospects for the different segments of demand, specifically international buyers, domestic investors and domestic home owners. Overall we expect city level house price inflation to remain on course to end the year at 10% year on year.Figure 2 - House price inflation by city (%yoy)
City level house price growth rate is 6.4%, up from 4.9% at the end of last year. 2017Q1 saw city level house prices rise by 3.5%, the highest quarterly rate of price inflation for 3 years. House price inflation in London continues to slow and has now reached 4.9% yoy which means the capital is among the five slowest growing cities along with Oxford and Cambridge.
City house price growth slows to 6.4%. Manchester fastest growing city as London slips to 10th in growth rankings. New analysis of city turnover reveals large increases and falls. Overall city turnover expected to be flat in 2017.
City level house price inflation is running at 6.9% while growth in London (6.4%) is running at its lowest level for 4 years and set to slow further. House prices in many regional cities where the recovery has been muted have material upside so long as the economy continues to grow and mortgage rates remain low.
House price inflation in Manchester hits 12 year high. Growth in regional cities continues to overhaul London which dropped to 7th in the city house price growth rankings for 2016. Bristol is still the fastest growing city +9.6% but could be overtaken by Manchester in Q1.