City house price growth is proving resilient, with average values up by 5% in the first half (H1) of this year, claims the latest report from Hometrack.
Birmingham has the fastest growing house prices of all UK cities, while four areas are registering declines in property values in real terms.
City house price growth is running at 5.1% per year, which is down from 8.8% on June last year. Nevertheless, house price inflation has picked up in recent months.
Growth for H1 2017 ranges from 0.2% in Aberdeen to 6.1% in Birmingham. This is consistent with an 11% rise in home purchase mortgages, which are also 5% higher than the five-year average.
City House Price Growth Proving Resilient, Claims Hometrack
13 cities have a lower annual growth rate than a year ago; London, Bristol and Oxford have recorded the greatest slowdown, as affordability and uncertainty are hitting demand. The rate of price falls in Aberdeen has slowed sharply.
House price growth is higher in seven cities, but the scale of these increases, compared to June 2016, are more modest. The exception is Edinburgh, where the rate of growth has bounced back from 1.8% last year, to 6.5%.
Despite a material slowdown in the rate of house price growth in southeastern England, house price inflation is holding up, although real incomes have been squeezed. The impact of Brexit was greatest over H2 2016 and house price growth has picked up over the past six months.
At the end of 2016, Hometrack predicted that city house price growth over 2017 would stand at 4%. On current trends, it expects this to be closer to 6-7%. There remains material upside for house prices outside southeastern England, it says.
Nominal house price growth in four cities is failing to keep pace with the rate of consumer price inflation, which is currently 2.6%; Cambridge (+1.9%), Oxford (+2.1%), Newcastle (+2.4%) and Aberdeen (-2.7%).
House price growth across the City of London has fallen to a five-year low of 2.6%, meaning that prices are flat in real terms. Inner London markets have the lowest rates of house price growth and are recording real price falls.
Sustained house price growth in large regional cities has pushed house prices ahead of their 2007 peak in 16 cities. At current growth rates, it will be another two years before Newcastle, Glasgow and Liverpool exceed their 2007 levels. Belfast will take much longer, with prices still 45% lower than in 2007.
Online estate agent eMoov has recently assessed what a similar market crash to that in 2007 would mean for house prices today: https://www.justlandlords.co.uk/news/house-prices-8-years-recover-crash/
The Founder and CEO of eMoov, Russell Quirk, comments on the Hometrack data: “City living will always drive the UK market and so it gives a good indicator of where is quickest out of the blocks, while the overall market is still wiping the post election sleep out of its eyes. The latest data from Hometrack suggests that the UK market has also almost broken free from the shackles of Brexit uncertainty, with the market performing notably better than last year.
“It is a mixed bag of sweets in terms of the current UK market and London seems to be the liquorice where buyer demand is concerned, a classic favourite, but an acquired taste and one that is waning in popularity – particularly inner London. Other areas, such as Bristol, Oxford and Cambridge, are also paying the price of their much higher price tags with slower growth, whilst Britain’s second city has come to the forefront in terms of the best property price performance, joined by the regionally varied ensemble of Edinburgh, Leeds, Manchester and Nottingham.”