Property prices in some of Britain’s biggest cities – excluding London – will increase by up to 30 per cent in the next four years, a new report predicts.
Birmingham, Edinburgh and Manchester are likely to see the biggest value leaps to close the gap slightly on London, which has begun to see prices soften.
Since 2009, average property values in the capital have accelerated 86 per cent in nominal terms, according to the latest Hometrack UK Cities index.
Booming: Property prices in Edinburgh are predicted to rise by up to 30% in the next four years
Cambridge and Oxford have performed like extensions of the London market, with prices rising by more than 70 per cent in the same timeframe.
However, annual growth has slowed in all three cities in the last year.
In Cambridge, values have fallen 1.1 per cent since January 2017 and now stand at a typical £427,700 the property analytics firm says.
Prices are up 1.1 per cent in Oxford and 1.6 per cent in London, with average values standing at £412,000 and £487,500 respectively – but it still means they are falling in real terms.
Edinburgh – which Hometrack tips to see stellar price growth in the next four years – was the top riser over the last year in the 20 cities the report looks at, with typical values up 7.7 per cent to reach £222,200.
This is followed by Birmingham at 7.3 per cent and Manchester at 6.7 per cent, with homes reaching £154,600 and £158,800 respectively.
| City | Average price | %yoy Jan-17 | %yoy Jan-18 | % growth from 2009 |
|---|---|---|---|---|
| Edinburgh | £222,200 | 2.60% | 7.70% | 24% |
| Birmingham | £154,600 | 6.40% | 7.30% | 36% |
| Manchester | £158,800 | 6.70% | 6.70% | 34% |
| Leicester | £168,700 | 6.20% | 6.40% | 40% |
| Liverpool | £114,600 | 2.80% | 6.20% | 19% |
| Leeds | £159,400 | 4.10% | 5.90% | 28% |
| Glasgow | £119,600 | 4.90% | 5.30% | 18% |
| Bristol | £273,400 | 8.10% | 5.30% | 71% |
| Nottingham | £144,500 | 5.60% | 5.30% | 36% |
| Bournemouth | £282,100 | 5.60% | 5.30% | 50% |
| Belfast | £133,100 | 2.70% | 4.90% | 27% |
| Sheffield | £132,300 | 3.60% | 4.80% | 23% |
| Portsmouth | £231,000 | 6.70% | 4.50% | 50% |
| Cardiff | £196,700 | 4.40% | 4.20% | 37% |
| Newcastle | £125,100 | 1.10% | 3.70% | 15% |
| Southampton | £222,600 | 6.10% | 2.10% | 46% |
| London | £487,500 | 4.90% | 1.60% | 86% |
| Oxford | £412,000 | 4.40% | 1.10% | 71% |
| Cambridge | £427,700 | 2.50% | -1.10% | 81% |
| Aberdeen | £165,700 | -5.60% | -6.40% | 6% |
| 20 city index | £248,900 | 4.00% | 5.00% | 56% |
| UK | £211,200 | 4.70% | 4.00% | 38% |
It suggests that the estimated house price gains will still value homes in the three cities far below those in Cambridge, London and Oxford – but the gap will narrow somewhat.
If prices did rise 30 per cent in Edinburgh for example, it would mean a typical home was worth £67,000 more than today.
Richard Donnell, insight director at Hometrack, said: ‘The income to buy a home in regional cities is well below the London average so in the near term we expect to see rising house prices stimulating additional buying and market activity in those areas.
‘House prices have some way to increase before there is a material constraint on demand. This assumes mortgage rates remain low by historic standards and the economy continues to grow.’
Strong growth: London, Cambridge and Oxford have seen big house price gains – but it is the likes of Edinburgh and Manchester which are set to see bumper growth
The report shows that prices in Aberdeen are just six per cent higher since 2009 while they are 18 per cent higher in Newcastle.
The wide variation in growth is down to local demand and economic factors, trends seen in previous housing cycles.
Overall UK city house price inflation is running at five per cent up from four per cent a year ago.
Cities outside southern England have further room for house price growth Hometrack concludes.
It does not expect house prices to match the scale of growth registered in London since 2009 as the underlying market dynamics for London are different, such as high levels of overseas and investor buying.
There are also questions over the sustainability of pricing in London where gross yields are sub 4.5 per cent and affordability levels are at an all-time high.
Hometrack expect average house prices in London to drift lower in real terms in the coming two and three years with lower turnover creating scarcity and supporting price levels.