Annual house prices growth in key UK cities is slowing
Price growth in key UK cities has slowed to more sustainable levels as the market adapts to a changing profile of demand, resulting from tax and policy changes and increased mortgage regulation, the latest index report suggests.
Overall the annual rate of house price inflation has moderated to 1.9% and 12 cities covered by the Zoopla index have a lower rate of price inflation than a year ago, markedly so in Edinburgh, Bournemouth, Portsmouth and Oxford.
Leicester currently has the highest annual growth with prices up 4.8% but the index report points out that this is the first time since 2012 that the fastest growth city has been below 5%. This is followed by growth of 4.6% in Liverpool and 4.5% in Manchester.
Prices increased by 4.1% in Cardiff, by 4% in Edinburgh, by 3.8% in Birmingham, by 3.6% in Belfast, 3.4% in Leeds, 3.3% in Glasgow, 3.1% in Nottingham, 2.8% in Sheffield, 2.2% in Bristol, 2% in Newcastle and 1.3% in Bournemouth.
The report explains that the acceleration in house prices since 2013, reaching almost 20% in London in 2014, and the subsequent slowdown since 2016 are part of the unfolding house price cycle.
‘We believe that the recent slowdown represents a return to a more sustainable pace of price growth rather than an impending re-correction in house prices,’ it adds.
Taking cities in northern England as an example, prices in Manchester have grown the most and are 22% higher than in 2007, the same performance as the UK. Prices are 11% higher in Leeds and Sheffield. These two cities have seen prices track closely over the last decade. Price growth in Liverpool has accelerated recently and they have now surpassed their 2007 levels.
Three cities, Newcastle, Aberdeen and Belfast, have prices still below 2007 levels. The report points out that in Aberdeen prices have fallen since 2015 in the wake of the oil price collapse and Belfast prices were excessively over valued in 2007 and are now more sustainably priced.
House prices have stagnated in London and Southern England, it also shows. While prices in southern cities are up to 56% higher than their 2007 peak, the reality is that values have stagnated, tracking sideways for much of the last four years and drifting lower more recently.
‘Looking ahead we expect current trends to continue. There is no sign of any sudden weakening in market conditions as the Brexit debate returns to centre stage. Market trends are being dictated by the fundamentals of local economies and the affordability of housing across cities. A change in the macro economic environment remains the greatest risk but households aren’t changing their behaviours yet,’ the report concludes.