City house price growth slows to 6.4% from 7.8% a year ago
- City house price growth running at 6.4%, down from 7.8% twelve months ago.
- Manchester registers fastest growth of 8.8%, London drops to 10th in growth rankings.
- Slower price inflation in high value cities follows static/falling sales volumes over last 12-36 months. Sales volumes expected to be flat over 2017 but down further in higher value cities.
City house price growth slows to 6.4%. Manchester fastest growing city as London slips to 10th in growth rankings. New analysis of city turnover reveals large increases and falls. Overall city turnover expected to be flat in 2017.
City house price growth 6.4%
UK City house price inflation is running at 6.4% compared to 7.8% a year earlier and in line with the 5 year annual average of 6.5% per annum.
Manchester the fastest growing UK city
A continued slowdown in London house price growth, where the rate of annual price increases (5.6%) is at its lowest level since 2013, is acting as a drag on headline growth (Fig. 1). Above average rates of growth are being recorded in regional cities such as Manchester, the fastest growing city covered by the index (8.8%), as well as Portsmouth, Bristol and Glasgow.
Fig. 2 plots the range in the annual rate of growth between the fastest and slowest growing cities since 2010. Affordability pressures continue to impact growth rates in high value cities in southern England. While growth in Manchester has hit close to 9%, the supply/demand dynamics are not strong enough in regional cities outside southern England to support double digit rates of house price growth. Aberdeen continues to register price falls of 5.9%.
A new phase in city level housing cycles
The moderation in growth rates for high value cities reflects a shift into the next phase of the housing cycle in these cities. This is reflected in changes in the level of housing turnover over recent years. Figure 3 plots the change in housing sales by city over the last 1 and 3 years.
Sales volumes flat to falling in unaffordable cities
Over the last 1 and 3 years housing turnover has been flat or falling in the highest value, least affordable cities such as London, Bristol, Oxford and Cambridge. This is a result of weaker investor demand, the impact of the Brexit vote and stretched affordability levels. In London overall sales volumes are down 7.5% since 2015. The falls in Aberdeen are down to the external shock of falling oil prices.