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July 2015 - Hometrack House Price Cities Index

On 21 August, 2015
  • City level house price inflation has picked up pace with annual growth running at 8.5%, up from 7.2% in April. Growth over the last 3 months (+4.3%) is at the fastest rate for 11 years.
  • Growing house price momentum is on the back of a 32% increase in sales volumes since April and a sustained catch-up in prices in cities outside southern England.
  • There remains further upside for house prices in regional cities outside London. City level price inflation remains on course to end the year at 10%.

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

Table 2 - UK 20 Cities House Price Index, 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

Figure 1 - UK and City level house price inflation (%yoy)
Source: Hometrack House Price Indices
Figure 2 - House price inflation by city (%yoy)
Source: Hometrack House Price Indices

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)
Figure 2 - House price inflation by city (%yoy)
Source: Hometrack House Price Indices
July 2015 - Hometrack House Price Cities Index
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