House prices across the UK’s 20 largest cities increased by 6.4% in the first half of 2015, led by Oxford, London and Glasgow, the latest index data shows.
Oxford was the fastest growing city with a ride of 8%, followed by London with house price growth of 6.6% and Glasgow with growth of 6.4%, according to the Hometrack UK Cities House Price Index.
Aberdeen was the weakest performer with house prices flat in the first half of the year, while northern cities like Leeds, Manchester, Liverpool and Sheffield, while seeing growth, still have average prices below the peak of the market in 2007.
The data also shows that on a quarterly basis prices in these top cities increased by 4.3% while Oxford and Cambridge continue to perform overall like direct extensions of the London market.
On a year on year basis growth across all 20 cities covered by the index is 8.4% with an average price of £226,200. At a city level this ranges from 11.6% in Cambridge to 2.9% in Liverpool.
Looking to the second half of the year, the index report suggests that the headline rate of growth across the 20 cities index looks set to move higher as continued growth in house prices pushes the year on year rate towards 10% as the recovery spreads and households continue to price low mortgage rates into house prices.
The greatest risk on the horizon is an increase in interest rates, recently highlighted by the Bank of England Governor. The report points out that 57% of outstanding mortgage debt is on variable rates, which is lower than the 73% high registered in the middle of 2012.
While a year’s worth of new buyers have been subject to tougher affordability tests, the majority of mortgagees have not, Hometrack director of research Richard Donnell pointed out.
Donnell explained that many home owners have continued to pay off debt while rates have been low, so any increase in mortgage rates is likely to impact market sentiment which, given the shortage of supply, would result in a marked slowdown in the rate of house price growth.
‘Rising demand for listing against a backdrop of low supply continues push city level house prices higher. At 8.4%, city level house price inflation is running higher than the overall UK rate. While house price growth might moderate slightly in the second half of the year, it looks increasingly likely that city level house price growth will return to double digits by the year end,’ said Donnell.
‘The greatest risk facing the housing market is an upward movement in interest rates which would check market sentiment, cool demand and result in a marked slowdown in house price growth,’ he added.
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Source: Property News Spain