London house prices falls ‘spread’ to other cities: Hometrack

Real-Estate-Agent-House-For-Sale-London-700.jpgProperty prices are continuing to rise in urban areas, according to Hometrack’s latest City Index, but despite this nationwide trend house prices are now falling in five major cities.

This index shows that UK city house price inflation was running at 5 per cent in January, up from 4 per cent a year ago.

Edinburgh is the city where house prices are rising at the fastest rate, up 7.7 per cent over the past year. Property prices in Birmingham, Manchester, Leicester and Liverpool are all growing by more than 6 per cent a year.

In contrast house prices fell in real terms in London, as well as in Southampton, Oxford, Cambridge and Aberdeen.

This City Index also shows the level of house price inflation in UK cities since the 2009 financial crash.

Not surprisingly London has seen the steepest house price inflation, with property prices up by 86 per cent over this period.

Other areas of strong growth include Oxford, Cambridge and Bristol – where house prices have risen by at least 70 per cent. In contrast house prices in Aberdeen have risen by just 6 per cent over this period.

Hometrack predicted that  house price in London would continue to “drift lower in real terms” over the next two to three years. It pointed out this trend would be fuelled by lower turnover – in total property transaction in the capital are down 16 per cent since 2014.

It adds: “There are questions over the sustainability of pricing in London where gross yields are sub 4.5 per cent and affordability levels are at an all time high.”

However it said cities outside southern England have further room for house price growth.

Hometrack said it expected regional cities such as Birmingham and Manchester to see property prices to increase by 20 to 30 per cent.It said these predictions were based on Hometrack analysis of the last housing cycle while making adjustments for today’s policy environment. This assume mortgage rates remain low and the economy continues to grow.

Legal & General Mortgage Club director Jeremy Duncombe says: “The year has started with year-on-year house prices rising at much more sustainable levels – certainly good news for first-time buyers.

“However, there is still a clear North/South divide in terms of affordability. Although weak house price growth in London is counteracting the strong growth of the Northern Powerhouses, buying in the capital is still considered out of reach by many.”

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