"The demand for property in key Northern powerhouse cities like Manchester and Liverpool is continuing to grow at a rapid rate, evident in the latest figures"
However, regional cities continue to register above average growth, with five cities registering price inflation over 7% - Edinburgh, Liverpool, Leicester, Birmingham and Manchester.
The divergence in house price growth between southern England and regional cities continues with overall HPI at 5.2%. London growth remains slow at +1%, and the greatest downward pressure on prices is being registered in inner London.
City house price growth running at 5.2%
UK city house price inflation was 5.2% in the 12 months to February 2018 compared to 4.0% a year ago. The divergence in house price growth between southern England and regional cities continues.
Half of the 20 cities covered by the index are registering higher annual growth than a year ago. Five cities are registering growth of more than 7% per annum: Edinburgh, Liverpool, Leicester, Birmingham and Manchester.
Ten cities are growing at a slower rate than a year ago with the greatest slowdown in Bristol, Southampton and London as affordability pressures impact market activity and the upward pressure on house prices.
Prices falling across 42% of London postcodes
House price indices report the trend in prices for the average property while the reality is there is a distribution of growth around this average. Using Hometrack’s more granular house price indices at postcode district level (e.g. SE5) we find that 42% of postcodes are registering year on year price falls. The remaining 58% are still registering positive growth.
Russell Quirk, founder and CEO of Emoov.co.uk, commented: "The appeal of city living continues to ensure that house price growth across the nation's major cities remains buoyant, despite wider market conditions. This imbalance of supply to meet demand in the more densely populated areas of the market has seen them buck the trend of a slower start to the year, to enjoy a greater rate of annual growth than this time last year.
Unfortunately for the capital the much higher price of getting on the ladder, and the greater degree of buyer uncertainty as a result, has seen London remain one of the ugly ducklings of city living where market performance is concerned.
However, as we've seen over the years, the popularity of the London market is cyclical and while it may have fallen out of favour for the time being, this cool in price growth is unlikely to prevail as the year plays out and it is highly unlikely we will see a market crash of any shape or form.
London is still viewed by many as the pinnacle of homeownership in the UK and while the growing political tensions with Russia will do little to help London's prime central market, vast pockets of the capital remain very popular among buyers."
Ged McPartlin, director at Ascend Properties, comments: “The demand for property in key northern powerhouse cities like Manchester and Liverpool is continuing to grow at a rapid rate, evident in the latest figures from Hometrack.
The issue we have is supply and demand. The lack of supply is pushing up demand and therefore increasing prices; not necessarily bad news for landlords seeking capital growth but this will be a blow to aspiring first time buyers struggling to get onto the property ladder.
Competition for both sales and rental property is high and this is contributing to the very interesting market we’re finding ourselves in. With the continued investment into both of these two cities likely to drive population figures even further, Manchester and Liverpool will be highly desired for the foreseeable future.”
Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, comments: “The latest Hometrack report cements what we’ve been saying for several years, that the north is best to invest. While prices across 42% of London postcodes are continuing to decline, cities such as Liverpool, Manchester and Leeds are sweeping the top spots with year-on-year growth of between 6.9% and 7.8%. This is on top of strong rental yield returns.”
Whilst many investors are turning their back on London and the south due to very poor rental yield returns and little or even negative capital growth, the north has been flourishing. Deals in northern cities are far stronger; for example, an investor can pick up a 2-bedroom apartment in Manchester for around £98,000 generating a 22.3% return on cash invested, financials you simply wouldn’t find in the south. Those who were quick to catch on to northern buy to let 4 years ago could now be sitting on returns in excess of 230%, demonstrating the strength of the market in the North West.
For savvy investors, the north is the place to be. You just need to know where to look.”
Simon Heawood, CEO of Bricklane.com, had this to say: “Whilst London has been the investor’s choice for many years, it’s clear that markets outside the capital are performing strongly. Most of the UK's 'gateway' cities such as Birmingham and Manchester boast attractive demographic trends and are benefitting from significant investment and infrastructure projects- increasing their attractiveness to buyers.
The London figures speak to the importance of investors staying dispassionate and selective in their approach. There are clear falling prices in some areas and at some price points, but it is a buyer's market and opportunities abound. Whilst there is still some ways to go in terms of improving affordability, buyers ready to get on or move up the property ladder will be looking to capitalise on the current fall in prices."
