Hometrack UK Cities Index records highest rate of house price growth since September 2014
UK Cities Overview
Hometrack’s UK Cities House Price Index has recorded a further jump in the rate of house price growth to 11.4%, up from 10.2% the previous month and 8.9% twelve months ago. This represents the highest rate of growth for 15 months as demand increases in the face of constrained supply not least from property investors who accounted for 1 in 5 of all buyers in 2015.
Richard Donnell, Insight Director at Hometrack says:
“With cities the focus of economic and demographic change it is no surprise that city level house price inflation continues to run ahead of UK house price growth which has also risen to 7.9%. The performance of house prices across these cities reflects the scarcity of supply and underlying demand for homes. Thirteen of the twenty cities have recorded continued growth in house prices for over 6 years with the remaining seven registering recovery in house prices between 2 and 4 years.”
Year on year house price growth – 20 cities and UK compared
Cambridge, London & Bristol post strongest annual growth
Cambridge has seen the highest annual rate of growth at 14.4% followed by London 13.8% and Bristol 12.8%. Prices may be rising but overall sales volumes across Cambridge and London look on track to be lower over 2015 as scarcity of homes for sale and affordability pressures limit overall volumes.
Meanwhile Aberdeen has seen house prices fall in the last year by 1.4% as housing demand weakens on the back of sharp drops in oil prices and the local economic impact of falling investment in oil and gas. Newcastle and Sheffield are recording the next lowest growth rates of 3.7% as prices rise slowly in cities where the housing recovery is at a much earlier stage.
Richard Donnell, Insight Director at Hometrack says:
“Looking across the 20 cities the impetus for growth continues to come from regional cities where prices are rising off a low base as household confidence improves and home owners utilise record low mortgage rates to access the market. Glasgow and Liverpool have recorded a significant increase in house price growth over the last 12 months in cities where the recovery has been running for just 2-3 years.”
Hometrack UK Index – 20 cities snapshot
Impact of rental demand and buy-to-let
A quarter of homes in the 20 cities covered by the index is private rented property and strong investor demand will explain some of the additional growth in city level house prices relative to the UK rate of growth. Property investors accounted for 1 in 5 of all UK house purchases in 2015.
Richard Donnell, Insight Director at Hometrack says:
“Much has been made of the impact of tax changes for buy to let investors with mortgaged property and the proposed new 3% stamp duty levy from April 2016. The latest Bank of England Credit Conditions Survey for 2015 Q4 suggests continued strong demand for mortgages from buy to let landlords while demand from existing home owners softened over Q4 2015. Some investors may look to move before April, we expect others will need to sell to support de-leveraging of their portfolios in order to reduce tax liabilities. This will bring much needed new supply to the market, especially for smaller sized homes.”
Donnell concludes:
“In the very near term the current momentum in house price growth looks set to translate into continued double digit price rises but we expect this to moderate as external factors start to weigh on market sentiment and affordability pressure finally catches up with high growth markets.”