Edinburgh, Glasgow, Southampton, Bristol and Birmingham property markets have seen faster growth than London in the last quarter, according to the latest cities house price index from Hometrack.
It also shows that while overall UK house prices have risen by 8.9% year on year, the rate of house price growth in the last quarter has slowed across 16 of the 20 cities. The firm is predicting house price growth of 2% in 2015.
House price inflation in London at 0.5% was the same average growth as Manchester, Portsmouth. Some key cities saw price growth diminish, most notably Aberdeen down 0.4% and Cambridge down 0.2%.
Other cities showed a pronounced slowdown in price growth such as Oxford seeing a quarterly rise of just 0.3%, Cardiff at 0.2% and Bournemouth at 0.1%.
But Scottish cities bounced back with Edinburgh at 1.8% growth and Glasgow at 0.9%, both continuing to register above average rates of growth as demand feeds back into the market after the independence.
However, house prices are above their 2007 peak in eight cities with London up 30.5%, Cambridge up 28.7% and Oxford up 21.9%, but these are also the markets starting to register the clearest slowdown.
This translated to an average annual increase in London property values of £57,000, which is nearly four times the national average of £15,200 and almost twice the UK’s average income. Liverpool recorded the lowest increase in values with just £3,000 added to house prices in the last year.
‘The high growth cities over the last year are now recording the fastest slowdown and this is most pronounced in smaller cities such as Cambridge and Aberdeen. The Aberdeen economy is closely related to the health of the oil industry and a weakening oil price is impacting the housing market,’ said Richard Donnell, research director at Hometrack.
‘The slowdown in London, which we identified in, will act as a drag on the UK rate of house price growth over the next 12 months. The rate of growth in house prices is starting to lose momentum across other cities in southern England, while across the rest of the country modest levels of house price appreciation continue as prices rise off a low base,’ he explained.
‘Overall we expect modest UK house price growth of 2% in 2015, which is more in line with earnings growth. Significant pent-up demand has feed back into the market in the last two years pushing house prices higher in all cities but the underlying rate of growth is now slowing across the majority of markets,’ he pointed out.
He also said that the introduction of mortgage market affordability tests in the middle of 2014 has reduced the overall impact of low mortgage rates on house prices. ‘A return to more modest rates of growth should be welcomed especially by the Bank of England. The ongoing heath of the housing market is now about the extent to which the growth in the economy feeds into continued growth in incomes and employment,’ he added.
Overall the firm believes that whilst there are only isolated price falls city level, there is clear evidence of more localised price falls starting to emerge with, for example 20% of London postcodes registering price falls in the last quarter.
‘We would expect to see further, modest price falls the months ahead as prices re-align off a high base to what buyers are prepared to pay. Changes in demand can feed quickly into prices as we have seen in the last 18 months but it is important to remember the equation works in both directions,’ he concluded.
