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Hometrack’s UK Cities Index records annual house price growth of 9.4% - faster than the 7.1% UK wide growth rate. City level house price inflation looks set to reach 10% by the year end. Large regional cities outside southern England are recording an acceleration in growth off a low base. Glasgow, Manchester and Liverpool are registering the highest rates of annual house price growth since 2007.
Large regional cities add impetus to price growth
Hometrack’s UK Cities Index, covering the most urbanised 5% of the UK with half the value of UK homes, is recording annual house price growth of 9.4% - faster than the 7.1% UK wide growth rate (fig.1.). As predicted earlier this year, city level house price inflation looks set to reach 10% by the year end.
Large regional cities outside southern England are recording an acceleration in growth off a low base. Glasgow, Manchester and Liverpool are registering the highest rates of annual house price growth since 2007. Improving consumer confidence and low mortgage rates are boosting demand in cities where the housing recovery is in its infancy.
Glasgow house prices currently average £110,000, less than half the £229,300 average price across all the 20 cities measured by the Hometrack UK Cities index. House prices in Glasgow stopped falling three years ago and have since risen by 13%. In the last 12 months they are up by 8.3%, which is the highest rate of annual growth across the city since August 2007.
Recovery 3 years old in Manchester and Liverpool
In a similar vein, Manchester house prices have been recovering since 2012 and average house prices have risen by 17% over this time to £141,200. In the last 12 months house prices across Manchester have grown by 7.0%, the highest rate of growth since July 2007.
Liverpool has registered the weakest house price performance of all the British cities covered by the index since the global financial crisis. House prices declined between 2007 and early 2013 and have since increased by just 10.5%. In the last 12 month year on year growth has risen to 5.1%, the highest since August 2007. Despite this modest recovery, the average price of £109,800 is still 13% lower than the 2007 peak.
House price recovery impacts activity
These city level indices show just how varied the housing recovery has been over the last six years. This varied pattern of growth impacts the loan to values for existing home owners and their capacity to borrow as well as investment decisions by developers and investors who are increasingly focused on finding better value in the regions outside London.
Central London goes ex-growth
The tentative recovery in large regional cities contrasts strongly with the rise of London house prices where average prices are up by 70% since 2009 (and by over 100% in the highest value markets). It is these high value markets that are now recording some of the weakest levels of house price growth (Kensington and Chelsea -2.6%, City of Westminster +1.3%) as tax and currency changes impact demand after a period of stellar price appreciation.
Modest slowdown in rate of growth still likely
Last month we reported early signs of a slowdown in the upward momentum in house prices which we still believe will materialise in the run up to the year end. The month on month change in the cities index in October was slightly lower than the last 4 months (0.9% in October versus an average of 1.2% over the last 4 months).
Outlook a balancing act
The outlook for the next 12 to 18 months will be a balance between how much the high growth London markets will slow and how much more momentum will come from cities where the housing recovery is still in its infancy. Our views on the outlook for 2016 will be covered in the next month’s index report.
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.
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.
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
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.