Property prices in key cities across the UK are continuing to rise in all but one location, according to the latest index, and growth of 4% is predicted for 2017.
Aberdeen is the only city to see price growth still falling but others are seeing price growth slow, most notably Cambridge which has seen the rate of growth fall from 12.5% to 2.5% over the last 12 months, the data from Hometrack shows. The momentum in London has also slowed from 7.6% to just 3%, the lowest level of price growth for 3.3 years.
London, along with Oxford, Cambridge, Bournemouth and Bristol have been the high growth cities of the last five years but some are now seeing growth rates slowing. The slowdown in Bristol is less marked over 12 months but since the middle of 2016 growth has declined more sharply from over 14% per annum to 9.9%.
Strong, steady growth is being recorded in Birmingham, Manchester, Leeds, Leicester, Nottingham and Portsmouth. These cities have been registering robust, consistent house price growth of 5% to 8% per annum over the last 12 months on stronger underlying market conditions.
But Aberdeen continues to register year on year price falls with values now down by 6.4% and has suffered from the decline in oil prices which began in the middle of 2014 affecting the local economy and demand for housing.
In terms of sales all the cities covered by the index saw a 50% to 60% increase in sales volumes over the last five years. Cities where house price growth has been high, and affordability levels are most stretched, have seen sales volumes level off over the last two years and fall back over 2016.
Sales are set to contract by more than 5% in London, Aberdeen, Bristol and Cambridge. In contrast, the cities registering sustained growth in house prices are expected to record higher turnover over 2016 such as Birmingham, Leeds, Leicester and Nottingham.
Looking ahead to 2017 Hometrack predicts that weaker growth in real household incomes and concerns over the impact of Brexit on the economy will weigh on housing market sentiment, particularly in southern England.
‘While the economy is projected to grow in 2017, levels of employment are forecast to grow more slowly although mortgage rates are expected to remain low by historic standards.
Given the current projections for the economy, we do not believe that any of the cities covered by the index will be registering year on year price falls at the end of 2017,’ the Hometrack report says.
‘However, we do expect the rate of city level house price growth to slow over the next 12 months led by weaker growth in cities across southern England. This is where affordability pressures on home owners are most extended and where previously buoyant investor demand has been impacted by fiscal changes and by tougher underwriting standards for mortgaged borrowers,’ it points out.
‘While we expect some moderation in the rate of house price growth from current levels in larger UK regional cities, such as Birmingham and Manchester, we believe the underlying fundamentals in these markets remain attractive and there is potential for further price appreciation over 2017,’ it adds.
In cities price growth of 4% is achievable in 2017, particularly in large regional cities, according to Hometrack but overall the national outlook depends on the scale of the slowdown in London.
‘We expect our London index to register nominal growth of 2% in 2017. This will equate to a fall in real terms. A harder landing for house prices could drag the headline rate lower. While house prices are registering small, single digit price falls in central London areas, a lack of forced sellers is expected to minimise the scale of price falls,’ the report adds.
