Regional cities in the UK are seeing robust home price growth, up 6.1% on average in the year to October 2017, the highest rate of growth since September 2016.
The latest Hometrack city index also shows that prices in cities are well above the 4.7% year on year recorded for the UK as a whole and this is being led by regional cities as London continues to be close to the bottom of the table.
However, two cities are still seeing annual price growth fall. In Aberdeen prices were down 3.5% year on year with the market being hit by lower oil prices. But Oxford has also recorded an annual price fall of 0.6%, a substantial change from the 6.6% growth seen a year ago.
The biggest price growth was recorded in Manchester with a rise of 7.9% taking the average price of a home in the city to £158,800, followed by Birmingham up 7.4% to £155,600 then Leicester and Bristol both up 6.6% to £165,700 and £278,900 respectively.
At the bottom of the index table is Aberdeen and Oxford, followed by Cardiff with annual price growth of 2.8% to £198,700, then a rise of 3% in Newcastle and London to £125,200 and £496,000 respectively.
Despite the recent increase in interest rates, Hometrack continues to predict that house prices in regional cities will keep growing with the potential to rise of 20% to 25% in cities such as Leeds, Manchester and Birmingham.
‘We believe this is very feasible so long as mortgage rates remain low and the economy continues to grow. These increases are equivalent to three years of growth at current levels. Projections from the Office for Budget Responsibility for weaker growth in the economy and earnings mean the timing of these increases will simply be drawn out over a longer period,’ the report says.
It also points out that London is registering price increases of 3%, this is being driven by outlying commuter areas. In central London prices are flat to falling in low single digits. The gap between asking and achieved prices is greatest in inner London at 8% to 10%.
‘House prices are in the process of adjusting to what buyers are willing or able to pay. Tax changes for investors and low yields have already reduced investor demand in London,’ it explains, adding that the abolition of stamp duty for first time buyers are likely to have a limited impact in London.
