House prices in larger regional cities in the UK have outperformed central London for the first time since 2005, the latest listing index shows.
Although central London recorded year on year house price growth of 3% in the first quarter of 2015 the capital’s most expensive boroughs are being eclipsed by growth in large regional cities, according to the UK Cities House Price Index from residential analysts Hometrack.
Some 12 of the UK’s largest regional cities have registered higher price rises year on year than Central London including Glasgow with growth of 7.6%, Manchester 6.8% and Leeds 6.6%.
Indeed, Kensington and Chelsea and Hammersmith and Fulham have seen price declines of 3.4% and 5.1% respectively amidst uncertainty due to the threat of mansion tax and affordability pressures in the run up to the general election.
Newcastle, Sheffield, Manchester, Leeds and Glasgow registered the strongest pick up in house price growth in the first quarter of 2015 as households gain in confidence over the economic outlook and attracted by record low mortgage rates.
Together these cities account for 30% of housing stock covered by the Hometrack index and this pick-up in growth is supporting the headline rate of house price growth which was 0.8% in the first three months of the year.
Average house prices across the 20 cities included in the index registered growth of 3.8% in the first quarter compared to 3% over the same period in 2014. While the UK picture is polarised by a North/South reversal in house price growth, the London market is divided by its East/West compass points.
The balance of house price growth across the index for London has shifted from high value markets driven by international capital to the lower value markets favoured by owner occupiers. Newham, Barking and Dagenham, Greenwich, and Croydon registered 14.2%, 12.5%, 12.4%, and 12.1% growth respectively in the last quarter compared to the same period 12 months ago.
The index report says that these boroughs are sustaining the capital’s growth, despite house prices in the affluent central London areas falling. The report also suggests that areas of London that are still undergoing regeneration or are benefiting from new investment have proved popular with owner occupiers priced out of the boroughs favoured by international buyers and investors.
The highest year on year growth rate was recorded in Newham and Barking and Dagenham, where average house prices are £275,000 and £215,000 respectively, and track 33% and 50% below the London average of £417,000.
‘House price growth is holding up better than expected as a result of a lack of new supply of homes for sale and record low mortgage rates attracting buyers into the market,’ said Richard Donnell, director of research at Hometrack.
‘Growth in London is still running in double digits and high capital growth rates in recent years have pushed down average loan to values in London, creating further capacity for additional borrowing for households that can pass tighter affordability tests for new lending,’ he explained.
He pointed out that the pattern in regional cities is similar to what happened in London from 2011 to 2013, except the majority of demand for housing in these cities is coming from domestic owner occupiers. It is not being boosted by international buyers or excess investor demand, as was the case in London, hence the more modest level of price rises compared to recent growth rates in the capital,’ he added.
‘As London’s first time buyers grapple over the affordability of the first rung on the listing ladder, there is an opportunity to buy ahead of the curve. Boroughs such as Newham, Redbridge, Greenwich, and Barking and Dagenham offer that elusive mix of short term affordability and good capital growth in the longer term,’ he concluded.
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Source: Property News Spain