Prices rise in all cities in key index for first time in over three years
Key cities in the UK continue to see property price growth with values in London and Aberdeen picking up in the 12 months to February 2019, according to the latest property index.
It is the first time in three and a half years that every city in the Zoopla index have seen price growth with London recording year on year growth of 0.4% and Aberdeen up 1.8%, a much stronger performance than the fall of 5.6% from February 2018.
Overall prices in the 20 cities covered by the index increased by 2.8%, more or less unchanged year on year, but growth is much stronger in some locations, led by Leicester where prices rose by 6.8% year on year, Manchester up 5.8% and Glasgow up 5.7%.
At the other end of the index prices in Cambridge increased by just 0.2% and in Oxford by 1%, while Portsmouth they rose by 1.3% and in Southampton by 1.5%.
The index report says that while market conditions remain weak in London, there are signs of a pick-up in demand following a three year repricing which has included absolute price falls which have been concentrated in higher value markets, and a widening in the discount between asking and achieved prices, with the largest discounts in inner London.
The data reveals that prices are falling across 55% of London postcodes, but this is down from almost 70% last October and the rate at which prices are falling in these markets is relatively low at unchanged to down 5%.
That means that prices continue to increase in 45% of London postcodes, although these are typically lower value, more affordable areas in outer London. It suggests that buyers who have delayed purchases and stood on the side lines since 2015, are starting to see greater value for money, perhaps seeking out buying opportunities while Brexit uncertainty impacts market sentiment.
‘This is supported by a willingness of sellers to be more realistic on pricing and accept offers from buyers. While we do not believe London prices will rebound, the closer alignment of buyer and seller expectations is a positive for market activity and sales volumes, which are still 25% lower than in 2016,’ the report points out.
Regional cities outside southern England have recorded above average price inflation over the last three years which the report says is a result of better affordability and rising employment which has boosted demand.
But the report warns that there could be slower growth in regional cities over 2019 as the growth is part and parcel of the unfolding housing cycle and house prices cannot keep rising ahead of earnings indefinitely.
‘The rate of price inflation in regional cities has started to moderate. We believe this will continue over the remainder of 2019,’ it explains, pointing out that Birmingham and Manchester are starting to lose momentum as there has been a significant increase in the proportion of postcodes registering growth of 0% to 5% and fewer areas recording growth over 5% per annum.
‘This is a result of growing affordability pressures as well as increased uncertainty. We expect prices to keep rising in these cities but at a slower rate, closer to earnings growth. This follows the pattern recorded in cities such as Bristol and Bournemouth in southern England,’ it adds.
Andy Soloman, chief executive officer of Yomdel, believes that there has been a shift in mentality amongst both buyers and sellers who realise if they do wish to sit on the fence until Brexit is finalised, they could be there quite some time.
‘As a result and much like Brexit, people just want to get on with it now and sellers are adjusting their price expectations in line with the current market climate, while buyers are taking the plunge and proceeding with a purchase. This uplift in demand and market activity has stimulated the market,’ he said.
It is no real surprise that the London market is starting to bounce back despite Brexit uncertainty still looming, according to Director of Benham and Reeves, Marc von Grundherr, adding that the pickup is almost certainly being led by opportunistic investors who are taking advantage of the notable price reductions.
‘However, it is only a matter of time before this momentum builds across all London home buyers and postcodes and we see a full return to form. We’ve seen London take the brunt of our political indecision while alternative regional frontrunners like Manchester and Birmingham have been leading the charge of late. However, as these markets start to tire, London’s property pedigree will ensure it remains one of the driving forces of the UK market,’ he added.
Overall the index reflects the underlying strength of the housing market, according to Simon Heawood, chief executive officer of Bricklane. ‘Despite great political uncertainty, house prices are rising across the country, even in London average house price growth is now back to positive territory,’ he said.
‘With house prices rising above inflation and rental yields further enhancing returns, property continues to represent an attractive investment for many, particularly in the context of rock bottom cash interest rates and stock market volatility,’ he added.