City house prices rising despite Brexit worries, says Hometrack

The latest figures from business consultancy Hometrack shows that house price inflation in the UK’s major cities is likely to reach up to 7.0 per cent by the end of the year - well above the original forecast of 4.0 per cent. 

In London, house price growth has declined to 2.6 per cent, the lowest level for more than five years; in addition, Bristol, Oxford and Cambridge have all seen a marked slowdown in the rate of house price growth – down by between 6.0 per cent and 10.0 per cent over the past 12 months. 

In Oxford and Cambridge house price growth, at 2.1 per cent and 1.9 per cent respectively, is below the rate of general inflation as measured by the Consumer Price Index, and this means house prices are falling in real terms for the first time since March 2012.

In contrast, seven cities have a higher rate of house price inflation. 

Birmingham is the fastest growing city with 7.8 per cent annual price growth and Hometrack expects growth to continue over the remainder of 2017 as prices are rising off a lower base – the average price of a property in Birmingham (£154,900) is less than a third of that in London (£492,700) – and are supported by record low mortgage rates and falling unemployment.

Other large regional cities outside the south of England such as Manchester and Leeds continue to register consistent and robust house price growth of between 6.0 and 7.0 per cent per annum, supported by the same economic factors which are driving Birmingham.

The recent rise in house price inflation in many of these large regional cities means only four cities have prices below 2007 levels – Liverpool, Glasgow, Newcastle and Belfast.

The reason why the housing recovery has been more protracted in these cities is because the underlying demand for residential property has not been sufficient to take prices back to where they were 10 years ago.  

“Despite a material slowdown in the rate of house price growth in south eastern England, the headline rate of city house price inflation is holding up, despite the squeeze on real incomes and uncertainty around Brexit” says Richard Donnell, research and insight director at Hometrack. 

“The Brexit impact was greatest over the second half of 2016 but house price growth has picked up over the last six months. This is consistent with an 11 per cent increase in the number of home purchase mortgages” he says.