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Highest and lowest annual city price growth is in Scotland

The highest and the lowest price growth in key cities around the UK are both in Scotland with Edinburgh recording a rise of 5.8% and Aberdeen a fall of 4.8% in the last 12 months.

Prices in Liverpool also increased by 5.8%, while Cardiff and Leicester saw prices rise by 4.4%, Manchester by 4.3% and Belfast and Nottingham 4%, according to the latest Zoopla house price index, powered by Hometrack.

After Aberdeen the biggest fall in growth in the year to July 2019 was in Oxford with a fall of 0.4% while prices were unchanged year on year in London. The index also shows a minimal rise of 0.2% in Cambridge and 0.6% in Portsmouth.

The previous index highlighted that market conditions were weakening in Birmingham and the latest figures show that the annual growth rate in the city has slowed noticeably to 3.5% as demand fails to keep pace with rising supply. The city has slipped to ninth in the annual growth rankings.

Other cities with slower growth than a year ago include Leicester, Nottingham, Sheffield and Glasgow and overall there are 12 cities with price inflation below the growth in average earnings which is currently 3.7% nationally.

The index report also looks at affordability. It says that after a spectacular boom and bust in Belfast house prices, the price to earnings ratio has stabilised at five times while Edinburgh at 7.4 times and Cardiff at 7.2 times, have ratios that have tracked the UK average over time.

Affordability in London is slowly improving from its recent peak. The price to earnings ratio is currently 13.1 time, down from a high of 14.1 time two years ago. This takes affordability, on this measure, back to the level last seen four years ago. However, despite this modest improvement, the London ratio remains relatively high, well above the 20 year average of 9.9 time.

Affordability is slowly improving across southern England. Oxford and Cambridge have recorded a similar trend to London with the ratio falling back to 2015 levels off a high base. Bournemouth, Southampton, Portsmouth and Bristol have the next highest affordability ratios of 7.5 time to 9.7 time. Here the ratio has started to slowly drift lower on weaker price growth.

All other cities have ratios in line or below the 20 year average and four cities have ratios that are still below the 20 year average. They are Belfast, Glasgow, Aberdeen and Newcastle.

The report says that how fast attractive affordability feeds into house price inflation depends upon consumer confidence and market sentiment. ‘House price growth has slowed more recently on weaker activity and increased uncertainty over the near term outlook. This is likely to build further over the autumn until there is greater clarity over the Brexit process and the implications for the economy,’ it adds.

According to Marc von Grundherr, director of agents Benham and Reeves, housing affordability continues to remain an issue for many looking to get on the ladder, particularly within major cities where home ownership is the least obtainable to the average person despite the generally higher level of wages on offer.

‘We have seen this improve as a result of healthier wage growth of late, but in cities with the largest property price tags, this improvement in earnings proves insignificant when compared to the continued financial hurdle posed by robust property values,’ he said.

‘For those in London, Cambridge and Oxford, the task is that much tougher, not only because of the high price of property, but because of the huge additional sums faced via stamp duty. Despite the relative affordability of current mortgage rates, these additional charges continue to be one of the biggest deterrents for those looking to buy in our major cities and this, in addition to current market uncertainty, is causing a drag in the rate of house price growth,’ he pointed out.