A report by property analyst group Hometrack has prompted lively discussions across the property sector. The report suggests that house price growth in some of the U.K.’s largest cities has hit up to 7.8% during the last 12 months. When you consider this against the backdrop of Brexit and the concerns and worries of investors this is a phenomenal performance. So where are the UK housing hotspots and how long will this run last?
City house prices
It would appear that cities such as Birmingham, Manchester and Leeds are proving to be extremely strong with regards to property price rises. While London continues to flounder with annual growth of 2.6% (the lowest level since 2012) maybe investors are finally switching out of the expensive London/South of England areas and finally looking towards the Midlands and the North?
The likes of Manchester and Leeds have always been prominent players in the property markets outside of London but it would appear there is specific interest in the Birmingham area. When you compare and contrast this to the London property market, the average property in Birmingham costs £154,900 which is less than a third of the average London property at £492,700. Is there potential to close this gap in house prices?
Mortgage rates and falling unemployment
Despite the headlines suggesting UK base rates will increase sooner rather than later, let’s not forget they are increasing from a historically low level. It will take many years to get back to the more traditional level for UK base rates and in the meantime many investors will take advantage of low finance costs. When you add in the fact that unemployment is coming down in the UK, despite concerns about the economy, this should eventually improve household incomes thereby tempting more people into the property market.
While there is no doubt that London has performed disappointingly over the last year, house price growth of 2.6% could be the bottom of the range. Affordability issues and even more acute concerns about Brexit have disrupted the market in the short term but nobody really expects London to fall into year-on-year property price falls.
Regional city performances
We will now show you a snapshot of the various regional year-on-year performances which are volatile to say the least.
Aberdeen -2.7%
Belfast 4.3%
Birmingham 7.8%
Cambridge 1.9%
Edinburgh 6.5%
Glasgow 3.3%
Leicester 5.8%
Leeds 5.4%
Liverpool 4.8%
London 2.6%
Manchester 6.4%
Newcastle 2.4%
Nottingham 6%
Portsmouth 5.6%
Sheffield 4.7%
Southampton 5.7%
As you will see from the above snapshot there are very different performances within this group with Birmingham leading the way and Aberdeen falling by the wayside (primarily because of the fall in the oil price).
Conclusion
There is so much differing information out there that it is difficult to get an angle on what is really going on. We know Brexit is causing confusion and concern, we know base rates are still near historic lows and we know that house price inflation is under pressure in some areas. However, there was also a fall in the rate of unemployment, hopes for a real increase in household incomes and more affordable property in the short, medium and longer term. On balance there is still a lot going for city house prices?
Until Brexit is resolved one way or another it is difficult to plan ahead with any great certainty.