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September 2015 - Hometrack UK Cities House Price Index

On 23 October, 2015
  • City level house price inflation is running at 8.4% per annum.
  • Thirteen cities have registered a slower 3 month rate of growth in September which, in part, will reflect seasonal factors and a fall in mortgage approvals in August.
  • The performance of city level house price growth since 2007 varies widely reflecting differing trends in local markets and how there is no such thing as a single UK housing market.

There are signs that the underlying rate of house price growth has peaked, as thirteen of the twenty cities tracked by the Hometrack Cities Index have registered a slower rate of growth post-election.

City level house price growth tentative slowdown
City level house price inflation is running at 8.4% per annum up from 6.6% in May as a post-election surge in demand continues to put upward pressure on house prices. There are signs that the underlying pace of growth may have peaked. The three month rate of growth expressed on an annualised basis appears to have reached a peak (fig.1).

Table 1- UK 20 city index summary, September 2015

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Source: Hometrack House Price Indices

The year on year rate of house price growth masks more volatility in the underlying rate of growth. There is a clear cyclical movement in house prices and since March 2015 the 3 month rate of growth, expressed on an annualised basis has risen to over 16%, slipping back slightly in September to 15%. This will in part be due to seasonal factors with mortgage approvals for home purchase increasing strongly over June and July while falling back 15% in August. The outlook for housing demand remains positive but the question is whether the post-election surge can be sustained. We expect demand to moderate in the run up to the year end with a modest slowdown in the pace of monthly house price growth compared to the last four months.

Table 2 - UK 20 Cities House Price Index, September 2015
Source: Hometrack House Price Indices
Fig. 1 – City house price inflation (%yoy and 3m ann.)
Source: Hometrack House Price Indices
Fig. 2 – Discount from asking to achieved price
Source: Hometrack House Price Indices

Signs of slower growth across 13 cities
It is dangerous to read too much into one month’s headline results data but at a city level the average rate of in the last three months has slowed across thirteen of the twenty cities covered by the index.

Discount from asking to achieved prices
The discount between asking and achieved prices averages 3% (fig.2). Newcastle and Liverpool have the largest discount between asking and achieved prices averaging 6% against below average house price inflation of 4%. Cambridge is registering a small premium of 2% as strong demand and scarce supply are sustaining the highest city level price growth.

Wide variation in performance in last 8 years
While city level house price growth is running ahead of earnings, average house prices are still below the levels recorded eight years ago in nine cities. The majority of cities have average prices between +18% in Bristol and -14% in Liverpool. Belfast prices still remain almost half the level seen in 2007 while those in London are 43% higher highlighting there is no such thing as a single UK housing market.

Fig. 3 – House prices relative to 2007 peak
Fig. 3 – House prices relative to 2007 peak
Source: Hometrack House Price Indices
September 2015 - Hometrack UK Cities House Price Index
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