House prices up 2.8% over the last year

Michael Lloyd

March 27, 2019

Leicester and Manchester have recorded price growth of 17% since the Brexit vote in June 2016, followed by a 16% increase in Birmingham, Zoopla’s UK Cities House Price Index has found.

The index, powered by Hometrack, found prices have been rising by 5% or more in seven cities led by Leicester, Manchester and Glasgow.

Andy Soloman, founder and chief executive of market researcher Yomdel, has found: “Extremely positive to see the larger, economic hubs of the UK all clock up some positive mileage so early in the year where price growth is concerned.

“I think we’ve now seen a shift in mentality amongst both buyers and sellers who realise if they do wish to sit on the fence until Brexit is finalised, they could be there quite some time.

“As a result and much like Brexit, people just want to get on with it now and sellers are adjusting their price expectations in line with the current market climate, while buyers are taking the plunge and proceeding with a purchase.

“This uplift in demand and market activity has stimulated the market and provided the first concrete signs of a pulse after running on life support for quite some time.”

This is the first time annual price growth has been positive across all 20 cities for 3.5 years, since August 2015, primarily a result of growth finally turning positive in Aberdeen.

Average house prices increased by 2.8% over the last year,Annual price inflation ranges between +6.8% in Leicester to +0.2% in Cambridge.

The annual rate of growth in London has increased slightly to +0.4%. While market conditions remain weak, there are signs of a pick-up in demand following a 3-year repricing of London homes.

This repricing process has come in two forms, absolute price falls which have been concentrated in higher value markets, and a widening in the discount between asking and achieved prices, with the largest discounts in inner London.

Our granular house price indices for London reveal that the proportion of postcodes registering price falls is starting to reduce.

The latest data reveals that prices are falling across 55% of London postcodes, down from almost 70% last October.

The rate at which prices are falling in these markets is relatively low – 0% to -5%. Prices continue to increase in 45% of London City postcodes, typically lower value, more affordable areas in outer London.

Buyers who have delayed purchases and stood on the side-lines since 2015, are starting to see greater value for money, perhaps seeking out buying opportunities while Brexit uncertainty impacts market sentiment.

While London has registered weak growth, regional cities outside southern England have recorded above average price inflation over the last three years. This is a result of better affordability and rising employment which has boosted demand.

The rate of price inflation in regional cities has started to moderate. Hometrack prediction this will continue over the remainder of 2019 and Birmingham and Manchester to start to lose momentum.

Its granular price indices for Birmingham and Manchester, found a significant increase in the proportion of postcodes registering growth of 0% to 5% and fewer areas recording growth over 5% per annum.

This is a result of growing affordability pressures as well as increased uncertainty. We expect prices to keep rising in these cities but at a slower rate, closer to earnings growth.

This follows the pattern recorded in cities such as Bristol and Bournemouth in southern England.

Brexit uncertainty is often cited as the cause of weaker house price growth over the last 12-18 months. Hometrack said it is more complex than that and sees Brexit uncertainty as a compounding factor in markets where fundamentals have weakened.

Price growth is just one measure of relative market strength. Levels of housing transactions are another important measure for businesses operating in the market. The willingness and ability of households to move home underpins revenues and business plans.

Data on transactions remains resilient with no obvious Brexit impact at a national level. Transaction volumes over 2018 remained in line with the 5-year average. The same is true for mortgage approvals for home purchase.

There has been no material drop in activity over 2018H2 as the Brexit debate has heated up. The very latest data from HMRC showed that housing transactions have increased slightly in the first two months of 2019.

With unemployment at a record low and mortgage rates still averaging 2%, buyers appear to be largely shrugging off Brexit uncertainty until there is a material.

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