hometrack

Contact Us

What are you interested in?
Valuations
Market Intelligence
Risk Analytics

How did you hear about us?

Cancel

Cancel

Confirming payment details

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

March 2016 - City level house prices at highest quarterly growth for 12 years

On 22 April, 2016
  • City house price growth in 2016Q1 was 4.2%, the highest for 12 years as the seasonal upturn in demand was boosted by investors rushing to beat the stamp duty deadline.
  • Tougher lending criteria and tax changes are likely to push investors into higher yielding, lower priced markets. Liverpool recorded the fastest increase in 2016Q1 as prices rise off a low base.
  • City level house price growth is expected to moderate in 2016Q2 with a market slowdown in higher value, lower yielding cities over the remainder of 2016.

The latest Hometrack UK Cities House Price Index reveals that city level house price inflation over the first three months of 2016 reached 4.2%, the highest rate of quarterly growth for 12 years as the normal seasonal increase in demand was boosted by demand from investors ahead of changes to stamp duty.

Table 1- UK 20 city index summary, March 2016

undefined

Source: Hometrack House Price Indices

 

Highest quarterly growth for 12 years

City level house price inflation over the first three months of 2016 reached 4.2%, the highest rate of quarterly growth for 12 years as the normal seasonal increase in demand was boosted by demand from investors ahead of changes to stamp duty. The year on growth for the 20 city house price index is running at 10.8%, ahead of 8.7% across the UK.

In the recent past, periods of accelerating house price growth have coincided with changes in market sentiment and demand – such as the introduction of Help to Buy in 2013 and after the 2015 General Election (fig. 1).

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

Liverpool records fastest growth in 2016Q1

The highest increase in house prices in the last quarter was recorded in Liverpool as prices rise off a low base, closing the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum - the highest year on year growth since 2007.

Fig. 1 – 20 cities index 3 month growth rate
Source: Hometrack House Price Indices
Fig. 2 – Index of house prices from 2007
Source: Hometrack House Price Indices

Investors ‘searching for yield’

The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property. Tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments are likely to push investors to search for higher yielding property which means more focus of investor demand in lower value cities, with lower buying costs, and further support for house price growth.

Fig. 3 – Gross yields by city (2016Q1)
Fig. 3 – Gross yields by city (2016Q1)
Source: Hometrack Dashboard

Focus on EU vote after stamp duty rush

With the rush to beat the stamp duty deadline now over, the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. This at a time when home buyers start to consider the implications of the EU referendum for the economy and mortgage rates.

We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU vote will limit further acceleration in house prices. We expect the rate of house price growth to slow more rapidly in high value, low yielding cities such as London where house prices will be more responsive to weaker investor demand.

March 2016 - City level house prices at highest quarterly growth for 12 years
Download the PDF

Related articles

UK Cities House Price Index – October 2019 26 November, 2019

UK city house price inflation is higher as prices start to firm up in London and Southern England. Large regional cities continue to post above average price growth on the back of rising demand and attractive affordability, supported by low mortgage rates. London is experiencing its highest rate of growth for 2 years and follows a period of modest price falls.

UK Cities House Price Index – September 2019 29 October, 2019

HPI is currently running at +2.4%, half the average growth over the last five years, and below average earnings growth. Time to sell has hit a 3 year high, while discount to asking price has widened across UK cities. Despite this, underlying market conditions still vary widely across large areas of the country.

UK Cities House Price Index – August 2019 26 September, 2019

With HPI moderating at 1.9%, it appears the slowdown in house price growth is an indication of a return to a more sustainable pace of price growth. However, a change in buyer mix from cash buyers to those with mortgages, plus wide variance in the recovery of house prices is sending mixed signals about current housing market activity.

UK Cities House Price Index – July 2019 23 August, 2019

UK City HPI is running at 2.3%, with Liverpool and Edinburgh seeing growth of +6% and Aberdeen -5%. Looking at average house price growth versus growth in average earnings, we can see that affordability levels are starting to improve. Twelve cities are registering price growth that is lower than the growth in average earnings.