UK Cities see fastest quarterly house price growth for 12 years as investors rush to beat stamp duty deadline

-Latest Hometrack UK Cities House Price Index saw prices rise 4.2% in Q1 2016
-Highest quarterly increase seen in Liverpool where recovery has been slowest
– Tougher lending criteria and tax changes push investors into higher yielding lower priced markets
– Year on year growth across UK Cities is running at 10.8%, ahead of the 8.7% reported across the rest of the UK
 The latest Hometrack UK Cities House Price Index reveals that city level house price inflation over the first three months of 2016 reached 4.2%, the highest rate of quarterly growth for 12 years as the normal seasonal increase in demand was boosted by demand from investors ahead of changes to stamp duty.
Tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments have pushed investors to search for higher yielding property which means more investment in lower value cities, with lower buying costs, and further support for continued house price growth.
Year on year house price growth across UK Cities reached 10.8% outstripping the 8.7% reported across the rest of the UK. The highest increase in the last quarter was recorded in Liverpool as prices rose off a low base and closed the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum – the highest year on year growth since 2007.
Richard Donnell, Insight Director at Hometrack says:
“The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property and seeking to beat the stamp duty deadline. With that deadline now passed, the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. Especially at a time when home buyers start to consider the implications of the EU referendum for the economy and mortgage rates.”
Donnell concludes:
In the recent past, periods of accelerating house price growth have coincided with changes in market sentiment and demand notably following the introduction of Help to buy in 2013 and after the 2015 General Election. We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU referendum will limit further acceleration in prices. Most likely the rate of growth will slow more rapidly in high value, low yielding cities such as London where prices will be more responsive to weaker investor demand.”
 Figure 1: UK Cities House Prices – City level summary

Figure 2: Hometrack 20 Cities House Price Index – 3 month growth rate
 
Source: Hometrack UK Cities House Price Index