Residential property prices in key cities in the UK increased by 4.9% in the 12 months to April 2018, but the growth is slowing, down from the 6.9% per annum over the last five years.
Manchester leads the growth with an annual rise of 7.7% to an average of £161,700, followed by Leicester up 7.4% to £171,000 and Edinburgh up 7.2% to £222,900, the latest Hometrack index shows.
In contrast, prices are down by 7.2% in Aberdeen, the only city in the index to see prices fall year on year. However, they rose by just 0.1% in Cambridge and by 0.8% in London. Although 16 of the 46 local authorities that make up the London city index are registering negative growth of up to 2.8%.
Bristol has registered the highest annual growth over the last five years at 8.9% but the growth rate is slowing with average prices up by 4.9% in the last year. Cities across the south coast of England such as Portsmouth, Southampton and, to a lesser degree Bournemouth, are also registering growth below the five year average.
Large regional cities in the Midlands, Northern regions and Scotland continue to register annual growth above the five year average. Hometrack predicts that prices will continue to increase in Manchester, Birmingham, Leicester, Nottingham, Cardiff, Sheffield and Edinburgh.
The data also reveals an increase in asking prices being discounted, particularly across Southern England. Birmingham and Manchester have the smallest discount at 2.6%. Discounts have narrowed in Liverpool but remain above average at 4.7% and in Newcastle it is 5.5%, while the largest is 9.6% in Aberdeen.
‘Market conditions are weakening in south eastern England but the size of discounts is less severe as prices are adjusting in weaker demand rather than as a result of adverse economic impacts. However, stretched affordability, Brexit uncertainty and multiple tax changes have impacted demand and mean sellers having to accept larger discounts to asking prices,’ the report says.
It also points out that the pace of overall city level growth is losing momentum, in part a result of virtually static prices in London, along with weaker consumer confidence and modest increase in mortgage rates. Indeed, mortgage approvals for home purchase drifted lower in the last quarter.
‘Our cities index reveals how local and macro factors are impacting on house price growth where the strength of the local economy and the affordability of housing set an important benchmark,’ it adds.
Sellers are adjusting their prices to get a sale in a slowing market, according to Russell Quirk, chief executive officer of Emoov. He believes that sellers are over optimistic in London. ‘There is almost an arrogance and an expectation that a seller should achieve more than the market is dictating simply because of their geographical location. Therefore, the adjustment in price is taking far longer and so transaction levels and in turn, house price growth, are slowing,’ he said.
‘When you move outside of this bubble and observe cities with a more affordable offering, the margin between expectation and current market climate is far smaller. As a result, this bravado on the part of the seller is non-existent and the market is moving a lot quicker and with more confidence, resulting in stronger house price growth,’ he explained.
