Northern cities lead urban house price growth in the UK

Cities in the north of England and Scotland are leading house price growth in the UK, with average values up by 6.4% year on year and 3.5% in the first quarter of 2017.

The strong growth in the cities covered by the Hometrack index which covers 20 key cities across the nation compared with average annual growth of 5.7% in the UK as a whole and quarterly growth of 2.5%.

The city index growth of 6.4% is up from 4.9% in December 2016 and the quarterly rise was the highest quarterly increase for three years as large regional cities registered an acceleration in the rate of price inflation.

Growth was led by Manchester with annual growth of 8.8% and quarterly growth of 3.4%, followed by Birmingham, up 8% and 3.5%, then Bristol up 7.3% and 2.1%, Edinburgh up 7.1% and 4.5% and Glasgow up 6.8% and 3.7%.

All cities saw annual price growth apart from Aberdeen where prices fell by 8.7% year on year and they were down 6.2% year on year. Quarter on quarter Oxford was the only other city to see prices fall with a decline of 1.75.

London, Oxford and Cambridge are in all in the bottom five cities registering the lowest annual growth. Cambridge was second from bottom after Aberdeen with prices up by just 1.7% year on year. Prices were up by 2.9% in Belfast, by 3.7% in Oxford and by 4.9% in London, all still reasonable levels of growth.

‘The impetus for faster house price growth is emanating from large regional cities. Attractive affordability levels, record low mortgage rates and an improving economic outlook are all supporting demand for housing. Together with limited availability of stock for sale this is creating scarcity and an upward pressure on house prices. Price rises are not running away but house price growth is well ahead of earnings growth,’ the report explains.

The figure show that the balance between new supply and sales remains ‘tight’ in Birmingham and Manchester while market conditions have weakened in London. In the case of Birmingham Manchester and Newcastle, continued improvement in underlying market conditions has resulted in the annual rate price increases reaching levels not seen since early 2005.

House price growth in London, Oxford and Cambridge has slowed to less than 5% for the first time in five years as affordability pressures, and tax changes for investors, constrain demand. ‘It is clear that in London sales are failing to keep pace with supply. Stock that is on the market will require downward price adjustments in order to sell,’ the report explains.

The report suggest that the general election may create some short term uncertainty although comparing the profile of sales volumes between election years and non-election years there is no material difference.

‘Compared to the level of uncertainty over Brexit, it is debateable whether the election will really make a material difference to buyers’ decision in the next two months. In our view the current market trends appear well set for the rest of 2017 where above average growth in regional cities offsets weak, single digit increases in southern cities,’ it concludes.