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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 house price growth bounces back in Q4 2016
UK city house price inflation bounced back in 2016Q4 with average values rising 2.2%, up from 0.3% in Q3 when growth was impacted by the Brexit vote.
UK city house price growth 7.2% over 2016
Growth over 2016 was down slightly compared to 2015 (7.7%) but in line with the average rate over the last 18 months. Falling unemployment and rising earnings continue to stimulate demand in more affordable housing markets where buyers are using low mortgage rates to bid up the cost of housing.
Impetus for house price growth shifting
The headline rate of growth masks a clear shift in underlying growth at a city level. The impetus for growth is shifting from London to regional cities with more attractive affordability and headroom for further price inflation (Fig. 3).
Bristol was the fastest growing city in 2016
Average prices increased 9.6% down from 11.6% in 2015 but affordability pressures are set to result in slower growth in 2017.
Manchester records fastest growth for 12 years
Manchester recorded the second quickest rate of growth over 2016 at 8.9%. This is the highest rate of growth in the city for over 11.5 years (July 2005). As we have highlighted in recent city index reports, underlying market conditions remain strong in Manchester.
The supply of homes for sales is only just managing to keep pace with demand which is keeping the upward pressure on prices. The same is true in other regional cities such as Birmingham and points to continued, above average price inflation over 2017.
London drops to 7th in city growth over 2016
Average prices in London increased by 7.3% over the year. This is the lowest annual rate of growth recorded across London for over 3 years (July 2013). Stretched affordability levels, with the price/earnings ratio at 14x, points to a prolonged period of price re-adjustment in the London housing market over the coming years.
Other cities recording faster growth than London in 2016 include Oxford (8.1%), Portsmouth (8.0%), Southampton (7.9%), and Birmingham (7.5%).
Speed of price falls slows rapidly in Aberdeen
Aberdeen house prices posted something of a revival in the final quarter of 2016. House prices registered an above average increase of 2.9% over the final quarter. This reduced the rate of annual price falls to 3.2% as the market bottoms out after registering an 11% drop in average house prices since 2014.Fig.3 - Shifting focus for house price growth
House prices are set to hold firm for the remainder of the year - despite the onset of recession and rising unemployment
The property market is set to lose 124,000 sales in 2020, with a combined value of £27bn, as a result of the COVID-19 market suspension.
The surge in demand for property is expected to delay house price falls, pushing them towards the end of 2020, according to this month’s UK House Price Index by Zoopla - the UK’s leading property resource
Two weeks on from the Government reopening the property market and pent-up demand has exceeded levels recorded pre-lockdown at the start of March.