Property price growth picks up pace across UK cities, latest index shows

Property price growth in key UK cities has picked up pace with annual growth running at 8.5%, up from 7.2%, according to the latest index from real estate analytics firm Hometrack.

Growth over the last three months of 4.3% is at the fastest rate for 11 years, the data from the index, which covers 20 main cities, shows.

The index report says that growing house price momentum is on the back of a 32% increase in sales volumes since April and a sustained catch-up in prices in cities outside southern England.

There remains further upside for house prices in regional cities outside London, it adds, and city level price inflation remains on course to end the year at 10%.

All cities with the exception of Aberdeen are registering house growth ahead of growth in average earnings which is currently 2.4%. The highest year on year growth is 10.9% in Cambridge followed by Oxford, London and Bristol.

The lowest growth rate is in Aberdeen with a fall of 0.7% and the report suggests that the weakness in the oil price is impacting the local economy and demand for housing. Other cities with below average house price growth are Newcastle, Liverpool and Sheffield where annual growth is running between 2.5% and 4.5%.
 
The report also says that there is room for further catch-up in house prices. Nine of the 20 cities still have average prices that are lower than 2007 levels although this gap is narrowing rapidly. The relative performance of house prices since 2007 remains wide and reflects different economic and demand side drivers of house prices.

Average prices in London are 40% higher than in 2007 and 14% higher in Bristol. Cities such as Edinburgh and Glasgow have registered a resurgence in growth more recently post the Scottish referendum although average prices remain 2% and 11% below their peak.

Looking ahead, the report says that low mortgage rates, economic growth and rising earnings will continue to stimulate demand and put an upward push on house prices across most cities.

As an international city, London is out on its own setting new highs for prices and unaffordability. ‘How long this can be sustained is down to the prospects for the different segments of demand, specifically international buyers, domestic investors and domestic home owners,’ the report explains.

‘Overall we expect city level house price inflation to remain on course to end the year at 10% year on year,’ it concludes.