Annual price growth in key UK cities now half what it has been over last five years
Property prices in key cities in the UK increased by an average of 2.4% in the 12 months to September 2019 to £258,200, the latest industry index shows.
But this is half the average growth rate over the last five years of 4.8%, according to the Zoopla cities house price index powered by Hometrack.
The index report shows, however, that underlying market conditions vary widely. The highest growth was in Leicester at 6%, followed by 5.1% in Manchester, 4% in Liverpool, and 3.7% in Belfast and Edinburgh.
At the other end of the index table, prices fell by 5.5% in Aberdeen and by 0.9% in Oxford while they increased by just 0.1% in London, by 0.5% in Portsmouth and by 0.8% in Cambridge and Southampton.
‘Brexit uncertainty is one factor weighing on buyers’ minds, but it is market fundamentals, particularly the affordability of housing and cost of moving, that are of greater importance in dictating the strength of city-level housing markets,’ said Richard Donnell, Hometrack director.
The data also shows that overall house price growth has moderated over the last three years as sales volumes decline as a result of high price growth and stretched affordability.
On top of this, the average time to sell a property across UK cities has reached a three year high of 12 weeks, up from eight weeks in 2016 while discounts to asking price have grown from 2.2% in 2016 to 3.8% today.
There are seven cities identified across England and Wales where underlying market conditions remain strong with potential for further price inflation. Cardiff, Leeds, Nottingham, Birmingham, Leicester, Manchester and Sheffield all have an average time to sell of between eight and nine weeks and discounts to asking price of 2% to 3%.
‘These cities have registered steady, above average house price growth over the last one to two years as demand for housing is sustained on the back of rising employment and attractive affordability,’ Donnell explained.
In contrast, market conditions remain weak across London, Oxford and Aberdeen. Here the average time to sell is over 14 weeks and the discount from the asking price to achieve a sale is over 5%, double the level in cities with the strongest market conditions.
Aberdeen continues to feel the effects of the oil price collapse while Oxford is an extension of the London market and a city with a high ratio of house prices to average earnings.
In London, market conditions are weakest in inner London where the average discount to asking price is 7.6% compared to 4.7% in outer London. Discounts are in line with the last 12 to 18 months across inner London and have declined slightly in outer London over 2019.
Donnell said that there is little prospect of an increase in house price inflation in London although greater realism on pricing is an important pre-requisite to increased sales activity.
Market conditions remain weak in cities across southern England where the time to sell is materially higher than three years ago. Portsmouth, Southampton, Bournemouth and Bristol have all seen the time to sell increase from six to seven weeks to 10 to 13 weeks as increased affordability reduces the pool of housing demand which pushes out sales periods.
The strongest market conditions remain in Scotland where a different system for marketing homes with more information provided up front to would be buyers and that makes for the fastest time to sell averaging five to six weeks in Glasgow and Edinburgh. With homes typically marketed as ‘offers over’ Glasgow and Edinburgh have ‘negative’ discounts to asking price as homes are selling for 6% to 7% above the asking price.
‘This latest report shows a continued polarisation in housing market conditions across the country set by underlying market fundamentals. Brexit uncertainty has been a compounding factor for lower market activity in some areas,’ Donnell pointed out.
‘Market conditions are set to remain weak in southern cities until pricing levels adjust to what buyers are willing, or can afford, to pay. London is three years into a repricing process, and we expect sales volumes to slowly improve over 2020,’ he said.
‘However, as we highlight in this report, there are large parts of the country where housing affordability remains attractive and continued economic growth is supporting housing demand, leading to shorter sales periods and lower discounts to asking prices,’ he added.