City house prices rise 10.1%

Sarah Davidson

December 18, 2015

City level house price inflation hit 10.1% in November while transaction volumes for the year as a whole look set to be 5% lower than in 2014, Hometrack research suggests.

The fastest rate of growth in the 12 months to November was registered in London at 13.3% (14.7% in 2014) where the average price has increased by £52,900 over the year.

Meanwhile the average income to afford a home in a UK city with an average 76% mortgage at a 3.5 times income mortgage is £49,700, up from £45,200 a year ago.

Richard Donnell, director of research at Hometrack, said: “The scarcity of homes for sale looks set to remain a feature of the market in 2016. This will only ease once we see greater levels of output from home builders and renewed activity amongst the 8m existing mortgaged home owners.

“Questions over the sustainability of house price growth are being raised as house prices accelerate on growing scarcity and lower sales volumes, especially in the high growth markets such as London.

“The greatest focus is on the influence of investor buyers, who we estimate account for one in every five buyers nationally. This group doesn’t need to buy homes and could react differently to home owners in the face of changing market or economic conditions.”

Donnell said that assuming the first interest rate rise is in the second half of 2016 Hometrack would expect 7% growth in city level house prices over 2016 with housing transactions broadly flat.

He added: “This is based on a slowdown in growth across London as affordability pressures and lower investor demand ease the upward pressure on house prices.

“Earlier and faster rate rises than those assumed by the market would reduce the scale of house price growth as they would further impact investor demand and mortgage affordability.”

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