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Hometrack’s inaugural UK Cities House Price Index reveals average house prices have grown between £61,000 and £5,000 in the 12 months to September 2014. The strongest performing cities are in southern England. In percentage terms, house price growth has ranged from 18.1% in London to 4.3% in Glasgow.
Hometrack’s new city level house price indices track the relative performance of house prices at a city and ‘city region’ level.
All 20 cities covered by the index have registered an increase in the annual rate of house price inflation (fig.1) with the exception of Aberdeen where the market is slowing off a high base.
London and Cambridge are registering the highest rate of annual growth at 18.1% and 17.9% respectively. Glasgow and Leicester are registering the slowest annual growth.
Fourteen of the cities are registering growth below the UK average of 9.0%. All of these cities are outside southern England with the exception of Bournemouth.
Much of the recent recovery in house prices outside the influence of London’s ‘city region’ has occurred in the last 18 months on improved consumer confidence and low mortgage rates.
Pent-up demand has fed back into the market but the rates of growth in most major conurbations outside London are around 5-7% compared to a UK average of 9% which is being influenced by the strength of house price growth in London.
UK house price inflation grew from 8.9% in August to 9.0% in September (fig. 2). The month-on-month rate has slowed since the spring with a 0.4% increase in September compared to 1.0% in April.
The average UK house price has grown over £15,000 in the last 12 months
The London city index recorded the first fall in the annual rate of growth for 18 months – declining off a high base from 18.9% in August to 18.1% in September. The slowdown has been more marked at a month-on-month level - average house prices in London grew by 0.4% in September, compared to an increase of 2.2% in April.
Other cities exhibiting a slowdown in the annual rate of growth are Oxford, Belfast and Aberdeen. Those where the headline rate of growth is still rising include Edinburgh and Glasgow, both off a low base.
The near term outlook is for a continued slowdown in London, where house prices are almost 30% ahead of 2007 levels. International demand has weakened on a variety of tax changes and a stronger pound. The level of absolute prices and the impact of the mortgage market review are also starting to cool domestic demand for housing.
Across the rest of the cities we expect levels of house price inflation to moderate. While house prices across all cities have bounced back in the last 12 months there is no evidence of any runaway acceleration in house prices. The majority of city housing markets are starting to register a levelling off in the rate of growth.
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.
City level house price growth is running at 7.7%, in line with our projections this time last year. We expect city house price growth to slow to 4% in 2017 with weaker growth in London and other southern cities offset by sustained growth in large regional cities.
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.