January's Zoopla Cities House Price index
Property prices in the UK’s largest urban areas are rising at an annual rate of 2.9% but growth is beginning to slow.
According to Zoopla’s latest Cities House Price Index, the rate at which prices are increasing in 13 cities is now lower than it was a year ago as a combination of affordability pressures and heightened uncertainty impact the market.
House price changes ranged from a 6% year-on-year gain in Leicester, to a 1.6% fall in Aberdeen, where property values are now an average of £34,000 lower than they were in mid-2015 when the oil price collapsed.
On the whole, northern cities, where affordability is less stretched, continued to outperform southern ones.
How does house price growth in the different cities compare?
According to the UK house price index data for the major cities, Leicester recorded the strongest annual house price growth of 6%, closely followed by Belfast at 5.8%, Manchester at 5.4% and Glasgow and Birmingham, both at 5.1%.
What about other measures?
House price growth is only one measure of a market’s strength. Others, such as the average time it takes to sell a home and the discount the buyer negotiates, show that 12 cities still have strong underlying market conditions, although all of these are located outside of the south of England.
The Cities House Price Index shows that Nottingham has the strongest market indicators overall, with homes taking just eight weeks to sell at a discount of only 2% of their asking price. Annual price growth in the city is also holding steady at 4.6%.
Glasgow and Edinburgh achieved sales prices of an average of 8% and 6% over the asking price, however, properties in Scotland are typically marketed as ‘offers over’ a certain price.
Which housing markets are weakest?
Aberdeen and inner London not only have the lowest house price growth, but they are also the weakest markets on other measures too.
Properties in both places currently take an average of 16 weeks to sell, with buyers negotiating the asking price down by around 7%.
In most large regional cities, the difference between asking prices and sales prices is narrowing, despite slowing house price growth, but in London this measure is continuing to widen. Discounts of 5% to 6% or higher indicate price falls.
What’s the outlook?
According to Zoopla’s latest data on housing sales, transactions levels continue to be in line with the five-year average, with first-time buyers the largest group of purchasers.
While uncertainty caused by Brexit has impacted the headline rate of growth, demand for housing is holding up better than many commentators had expected.
Even so, city-level house price growth is expected to moderate further in the near term.
Over the longer term, underlying market conditions remain strong across many cities, so there is the potential for further house price inflation once the outlook becomes clearer.
To find out how the Zoopla Cities House Price index, powered by Hometrack, is formed click here.