House prices in key UK cities have increased on an annual basis by 6.3%, up from 4.9% a year ago, with Glasgow recording the strongest growth at 7.9%, the latest index shows.
The cities index report from Hometrack also says that price growth is projected to be 5% in 2018 with regional cities outpacing London. Indeed it is cities with the weakest growth in prices since 2009 that are currently recording the highest rates of price inflation.
Scotland also has the second highest growth with prices in Edinburgh up 7.6% but it has the lowest too with prices in Aberdeen still falling, down 3.7% year on year. Prices in Glasgow and Aberdeen are also still below their peaks in 2007 by 4% and 3% respectively.
Other cities are also still below the 2007 peaks. In Liverpool prices are 6% below peak, in Newcastle they are 4% below and in Belfast they are 44% below peak levels. The biggest rise since 2007 has been in London with prices up 54% from peak.
The index report says that housing market activity across Scotland has picked up over 2017 and this has resulted in Glasgow and Edinburgh topping the growth table in November for annual price growth.
In third place is Leicester with annual growth of 7.5%, followed by Birmingham up 7.3%, Manchester, which has previously topped the table, up by 6.6%, Nottingham up 6.4%, Liverpool up 6.2% and Bristol up 6.1%.
After Aberdeen it is the cities of Oxford, Cambridge and London that have the weakest annual house price growth with rises of 0.7%, 2% and 2.7% respectively.
The report points out that the highest annual growth rates are being registered in cities where house prices are at or below their 2007 levels in nominal terms. Housing affordability remains attractive in these cities compared to the long run average.
The change in city level housing turnover over the last three years has varied widely reflecting differing strength in underlying demand. Eight regional cities have recorded growth in turnover exceeding 5% per annum over the last three years led by Liverpool, Manchester, Glasgow and Birmingham. ‘These cities are where there has been sustained price inflation over the last year as underlying demand for housing improves,’ the report says.
At the other end of the spectrum, housing turnover has fallen across cities in South Eastern England over the last three years including London, Oxford and Cambridge. ‘Record high affordability levels have priced growing numbers of households out of the market and this has reduced turnover. This in turn has created an element of scarcity which has supported prices in the absence of forced sellers. We expect levels of turnover to continue to decline further in these Southern cities over 2018,’ it points out.
A year ago Hometrack predicted that UK city house price growth would be 4% as a continued recovery in regional city house prices would offset very low nominal growth in London.
It expects 2018 to follow a similar pattern. ‘There is 20% to 25% of additional upside in house prices in regional cities were price to earnings levels to move above their 15 year average. That is before any additional allowance for the impact of lower mortgage rates. With the clouds of uncertainty around Brexit lifting very slightly we expect regional cities to continue to deliver above average house price growth in 2018,’ it explained.
But in London the prediction is that house price inflation is likely to remain in low single digits over the course of 2018. ‘London is facing a drawn-out period where house prices and earnings need to re-align. Our central view is that this will be achieved through single digit real house price falls over several years on lower sales volumes,’ the report said.
‘London’s home owning households have a significant equity buffer against which to absorb price reductions but the willingness to accept lower prices takes time to feed through into agreed sales prices. Only seven of the 45 local authorities that comprise the London City index are registering year on year price falls in nominal terms,’ it added.
Russell Quirk, chief executive officer of eMoov, believes that a 5% growth forecast for 2018 is probably realistic. ‘But the UK market is a mixed bag and there is a drastic difference even between cities within a fairly close proximity to each other, with the likes of Glasgow and Birmingham performing far better than Aberdeen and London for example,’ he said.
‘A 5% growth forecast is perhaps a little optimistic for those at the bottom end of the table, especially home owners in London. A 3% increase across the capital is probably the best we will see in 2018, but positive signs for the market as a whole and momentum that will no doubt continue to build over the coming year,’ he added.
