23rd January 2015
The recovery in house prices has spread out of the capital and the gap between the best and worst performing cities has narrowed to its lowest levei in 15 years.
Research by residential property analysts Hometrack show that UK house prices increased by 0.4% in December, and were up 8.3% year-on-year. However, the rate of growth has plateaued and is expected to slow in 2015.
The gap between the best and worst performing cities in the country has narrowed to its lowest level since February 1999.
Hometrack said there were now two distinct types of cities in the UK when it comes to house prices: those that are ‘accelerating off a low base’ following static or falling prices and ‘those that have enjoyed strong house price recovery over the last two years’ but prices are now starting to cool due to affordability.
There were 11 cities in the acceleration phase in the second half of 2014, led by Edinburgh, Aberdeen and Glasgow where the referendum boosted housing demand.
Newcastle, Leicester and Liverpool have also seen prices increase from a low base and house prices in these cities are 9%, 2% and 15% below their 2007 peak levels.
The cities leading the slowdown are Oxford, London, Cambridge and Bristol, where prices have fallen in the second half of 2014 from a high, double digit, rate of growth.
Bournemouth, Belfast and Leeds have also shown signs of slowdown thanks to housing demand reducing, tougher mortgage checks and affordability constraints.
Richard Donnell, director of research at Hometrack, said growth would plateau this year.
‘House price growth at a city level looks set to converge further in the first half of 2015 as high growth markets continue to slow and lower growth markets start to see growth plateau,’ he said.
‘Pent-up demand has fed back into the market in the last two years, supported by record low mortgage rates, but mortgage approvals have weakened in the last five months with a knock-on impact on house price growth.
‘Low mortgage rates are making housing stock look affordable but it is the willingness and ability of households to borrow, against the background of greater mortgage regulation, which will most influence the housing market in 2015.’