House Price Growth in UK Cities Up to 6.3%, Reports Hometrack

The annual rate of house price growth in UK cities has risen to an average of 6.3% – up from 4.9% a year ago, according to the latest UK Cities House Price Index from Hometrack.

The rate of house price growth has accelerated over the last six months, with robust demand for housing recorded in regional cities outside of southern England.

Housing market activity across Scotland has picked up over 2017, resulting in Glasgow recording the highest rate of house price growth of the year (7.9%), followed by Edinburgh (7.6%). Leicester and Birmingham have also recorded house price growth over 7.0%. Aberdeen continues to register price falls, with the average value down by 3.7% over the past 12 months.

The highest annual growth rates are being recorded 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-term average.

House Price Growth in UK Cities Up to 6.3%, Reports Hometrack

Changes in the level of housing turnover provide important context for the underlying health of city-level housing markets, Hometrack explains. Its provisional estimates for turnover in 2017 reveal an increase in turnover in Scottish cities over 2017.

Despite headline price falls since 2014, Aberdeen is set to register higher property sales over 2017.

The change in city-level property turnover over the past three years has varied widely, reflecting differing strength in underlying demand. Eight regional cities have recorded growth in turnover exceeding 5% per year 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.

At the other end of the spectrum, housing turnover has fallen across cities in southeastern England over the last thee years, including London, Oxford and Cambridge. Record high affordability levels have priced growing numbers of households out of the market, which has reduced turnover. This, in turn, has created an element of scarcity, which has supported prices in the absence of forced sellers. Hometrack expects levels of turnover to continue to decline further in these southern cities over 2018.

A year ago, the firm predicted that UK city house price growth would stand at 4%, as a continued recovery in regional city house prices would offset very low nominal growth in London. Hometrack expects 2018 to follow a similar pattern.

For London, it expects the rate of house price growth to remain in low, single digits over the course of next year, as the capital is facing a drawn-out period where house prices and earnings need to re-align. The firm’s view is that this will be achieved through single-digit real house price falls over several years, on lower sales volumes. London’s homeowning households have a significant equity buffer against which to absorb price reductions, but the willingness to accept lower prices take time to feed through into agreed sales prices, it explains.

Just seven of the 45 local authorities that comprise the London city index are registering year-on-year price falls in nominal terms.

Russell Quirk, the Founder and CEO of online estate agent eMoov.co.uk, comments on the latest index: “A strong end to the year for city price growth, and particularly positive for homeowners seeing a strong uplift in prices across those cities that have struggled to recover since 2009.

“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 continues: “A 5% growth forecast is perhaps a little optimistic for those at the bottom end of the table, especially homeowners 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.”