The average prices of a house in the UK’s largest cities increased by 5.1% in the 12 months to June 2017, but growth in London slowed to 2.6%, the lowest rate for over five years.
But the annual growth is down from the 8.8% recorded in June last year although it is still robust in larger regional cities such as Birmingham, Manchester and Edinburgh, according to the figures from the latest Hometrack cities house price index.
Growth in the first half of 2017 ranged from 0.2% in Aberdeen to 6.1% in Birmingham and while price growth is higher in seven cities, the scale of the increases compared to June 2016 are more modest. The exception is Edinburgh where the rate of growth has bounced back from 1.8% a year ago to 6.5% today.
Some 13 cities have a lower annual growth rate than a year ago with London, Bristol and Oxford recording the greatest slowdown as affordability and uncertainty impact demand in these cities but the report points out that the rate of price falls in Aberdeen has slowed sharply.
Prices in Cambridge were up just 1.9%, in Oxford by 2.1%, In Newcastle by 2.4% and In Aberdeen were down 2.7%, the data shows.
The report also shows that sustained house price growth in large regional cities has pushed house prices ahead of their 2007 peak in 16 of the 20 cities covered by the index but at current growth rates it will be another two years before Newcastle, Glasgow and Liverpool exceed their 2007 levels and Belfast will take much longer with prices still 45% lower than in 2007.
Looking ahead to the second half of 2017 the report suggests that even with a material slowdown in the rate of house price growth in south eastern England, house price inflation is holding up despite the squeeze on real incomes and uncertainty around Brexit. The Brexit impact was greatest over the second half of 2016 and house price inflation has picked up over the last six month.
At the end of 2016 Hometrack predicted that city house price growth over 2017 would be 4% but on current trends the firm now expects this to be closer to 6% or 7%. ‘There remains material upside for house prices outside south eastern England. The outlook for mortgage rates, employment and economic growth that hold to key to how fast this translates into higher house prices over the next two to three years,’ it concludes.
The data shows how the property market in key cities has remained resilient despite political and economic uncertainty, according to Nick Leeming, chairman at Jackson-Stops & Staff with vibrant areas such as Birmingham and Manchester experiencing strong annual house price growth.
‘It comes as no surprise however that inner London markets are experiencing a slowdown. The reduction in price levels is a result of the draconian property related tax measures brought in over the last few years, which is restricting buyers and sellers from making a move unless it is completely necessary,’ he pointed out.
‘Growth in London prices has now slowed to the lowest rate for over five years and although change is needed from the Government to get the market moving again, London’s global safe haven status means that its appeal among investors both in and outside the European Union will continue to endure in the long term,’ he added.
Russell Quirk, chief executive officer of eMoov, believes the figures show that the housing market had coped well with Brexit uncertainty so far, performing notably better than last year.
He said that cities such as Bristol, Oxford and Cambridge are now seeing slower growth but this is probably due to prices having been over inflates, while other cities such as Edinburgh, Leeds, Manchester and Nottingham are not outperforming them.
