Annual growth is running at 8.5%, up from 7.2% in April on the back of low mortgage rates, tight supply and a 32% increase in transactions volumes since April 2015.
All cities with the exception of Aberdeen are registering house growth ahead of growth in average earnings (currently 2.4%). The highest year on year growth is 10.9% in Cambridge followed by Oxford, London and Bristol. The lowest growth rate is being registered in Aberdeen (-0.7%) where the weakness in the oil price is impacting the local economy and demand for housing. Other cities with below average house price growth are Newcastle, Liverpool and Sheffield where annual growth is running between 2.5% and 4.5%.
However there is room for further catch-up in house prices. Nine of the twenty cities still have average prices that are lower than 2007 levels although this gap is narrowing rapidly. The relative performance of house prices since 2007 remains wide and reflects different economic and demand side drivers of house prices.
Average prices in London are 40% higher than in 2007 and 14% higher in Bristol. Cities such as Edinburgh and Glasgow have registered a resurgence in growth more recently post the Scottish referendum although average prices remain 2% and 11% below their peak.
In its Index, Hometrack said:
"Low mortgage rates, economic growth and rising earnings will continue to stimulate demand and put an upward push on house prices across most cities. As an international city, London is out on its own setting new highs for prices and (un)affordability. How long this can be sustained is down to the prospects for the different segments of demand, specifically international buyers, domestic investors and domestic home owners.
"Overall we expect city level house price inflation to remain on course to end the year at 10% year on year."
Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:
“Following lower levels of growth earlier in the year, house prices have increased 4.3% on average in the three months to July - the highest quarterly growth for 11 years. In part, prices are being driven by increased activity in the housing market, but prices are also being pushed up by a lack of available properties.
“For many years, we have simply not been building enough properties to keep up with demand, particularly as the number of households in the UK grows. This not only makes it harder for first time buyers to step onto the property ladder, but also for those who already own their home to buy another. To stop prices rising so quickly, we will need to build around 240,000 houses each year in order to ease the competition for properties, as this is the only way to address the sizable gulf between supply and demand.”
