House price growth in London has dropped to 2.6% matching inflation while other cities are resilient with over 5% increase for the year.
Research from the Hometrack city house price index shows house prices are flat in real terms with growth at 2.6% is the lowest rate for over 5 years matching the Consumer Price Index (CPI) of inflation.
Inner London markets have the lowest rates of house price growth and are registering real price falls whereas the average for UK cities is 5.1% year-on-year.
Birmingham has the highest growth in property values up 8.0% over the year with average current price of £155,400 while Aberdeen prices are down -3.0%.
Higher prices are good for remortgage buyers as it gives them an opportunity to release capital which they can use to improve their home, such as adding an extension, new kitchen or bathroom.
Majority of cities prices above 2007 peak
From the index of twenty large regional cities, sustained house price growth have pushed average values of sixteen cities above the 2007 peak.
The UK cities house price index from Hometrack shows the top twenty cities growth over the last year to June 2017:
| City | Average house price | Annual change |
|---|---|---|
| Birmingham | £155,400 | 8.0% |
| Manchester | £157,500 | 7.1% |
| Nottingham | £148,300 | 6.9% |
| Southampton | £229,000 | 6.5% |
| Leeds | £162,600 | 6.2% |
| Leicester | £165,100 | 5.8% |
| Portsmouth | £231,300 | 5.7% |
| Bournemouth | £280,900 | 5.4% |
| Edinburgh | £209,400 | 5.4% |
| Cardiff | £198,900 | 5.3% |
| Glasgow | £119,300 | 5.3% |
| Sheffield | £133,900 | 4.7% |
| Bristol | £268,400 | 3.7% |
| Belfast | £129,500 | 3.1% |
| Liverpool | £116,900 | 2.8% |
| Newcastle | £127,200 | 2.8% |
| London | £494,300 | 2.6% |
| Cambridge | £432,400 | 1.9% |
| Oxford | £418,400 | 1.2% |
| Aberdeen | £179,700 | -3.0% |
Four cities have average property values below the 2007 peak with Newcastle, Glasgow and Liverpool expected to exceed this level at current growth rates in 2 years whereas Belfast remains 45% below peak levels.
The resilient rise in city house prices means first time buyers may struggle to purchase their first home and would require a larger deposit or higher earnings.
For home movers buying their next larger home the price gap with their current home may increase which means they need a larger mortgage.
House price growth slowing over the year
Over the last year thirteen cities have experienced lower house price growth with London, Bristol and Oxford recording the greatest slowdown.
The main reason is affordability and economic uncertainty reducing the demand even though mortgage interest rates are at an all time low level.
London property values are averaging £494,300 while other cities like Cambridge are at £432,400 and Oxford with £418,400 have the highest prices in the country.
With higher house prices in the capital buy-to-let landlords can look to outer London for affordable properties to help improve rental yields.
For older homeowners in these regions the higher values allows equity release mortgage buyer to stay in their home while accessing the wealth in their property to help children start or expand a business or buy a more expensive home.
According to Hometrack, although there is a material slowdown in the rate of house price growth in south eastern England, property values are holding up despite real incomes under pressure and Brexit uncertainty.
At the end of 2016 the prediction for this year was 4.0% house price growth and Hometrack expect this to be closer to 6-7% by the end of 2017.
What are your next steps?
Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to help maintain your standard of living as costs rise.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the mortgage cost calculators, equity release mortgage calculator and property value tracker chart.
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