City level house price inflation is running at 8.4% per annum up from 6.6% in May as a post-election surge in demand continues to put upward pressure on house prices. There are signs that the underlying pace of growth may have peaked. The three month rate of growth expressed on an annualised basis appears to have reached a peak.
The year on year rate of house price growth masks more volatility in the underlying rate of growth. There is a clear cyclical movement in house prices and since March 2015 the 3 month rate of growth, expressed on an annualised basis has risen to over 16%, slipping back slightly in September to 15%. This will in part be due to seasonal factors with mortgage approvals for home purchase increasing strongly over June and July while falling back 15% in August.
The outlook for housing demand remains positive Hometrack have questioned whether the post-election surge can be sustained. It expects demand to moderate in the run up to the year end with a modest slowdown in the pace of monthly house price growth compared to the last four months.
The discount between asking and achieved prices averages 3%. Newcastle and Liverpool have the largest discount between asking and achieved prices averaging 6% against below average house price inflation of 4%. Cambridge is registering a small premium of 2% as strong demand and scarce supply are sustaining the highest city level price growth.
While city level house price growth is running ahead of earnings, average house prices are still below the levels recorded eight years ago in nine cities. The majority of cities have average prices between +18% in Bristol and -14% in Liverpool. Belfast prices still remain almost half the level seen in 2007 while those in London are 43% higher highlighting there is no such thing as a single UK housing market.
Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:
“Both the value of homes and the speed of house price inflation varies significantly across the UK. Today’s figures highlight that properties in Bristol have increased in price by 1.2% month on month, compared to a fall of -0.4% in the Sheffield region. This is not only bad for the health of the market, but it also creates potential barriers for aspiring homeowners. With house prices rising faster than wages, many buyers are finding that the cost of homeownership is increasing faster than they can save for a deposit. High prices can also mean that people are forced to move out of the area they want to live in, to somewhere more affordable."
