"In Glasgow, Edinburgh and many other large regional cities affordability is less of a barrier than in London and the south eas"
Housing market activity in Scotland’s two largest cities has picked up markedly over 2017 with Glasgow closely followed by Edinburgh where annual house price inflation is running at 7.6%. However, Aberdeen continues to register price falls due to the impact of the fall in the oil price with average values down 3.7% over the last 12 months.
The annual headline rate of growth for the Hometrack UK Cities House Price Index reached 6.3% in November up from 4.9% a year ago. This overall rate of house price inflation has defied conservative growth forecasts by many market commentators at the start of the year and accelerated over the last six months driven by strong demand for housing in regional cities outside London and southern England. As we move into 2018, Hometrack expects overall UK city house price growth of 5% over the course of the next 12 months.
The highest annual growth rates are being registered in cities where house prices are at or below their 2007 levels in nominal terms. The current group of high growth cities includes Leicester (7.5%), Birmingham (7.3%), Manchester (6.6%) and Nottingham (6.4%). These cities have registered a weaker recovery in prices since 2009 and have more attractive housing affordability than the likes of London, Cambridge and Oxford where unaffordability is at a record high.
Meanwhile London is facing a drawn-out period during which there will be a slow re-alignment of house prices and earnings. We expect London house price inflation to end 2018 around 1% which means prices falling in real terms alongside a further decline in sales volumes.
Richard Donnell, Research and Insight Director at Hometrack, said: “Over the last 12 months there has been a dramatic south to north shift in the momentum of house price growth which has culminated in Glasgow registering the fastest rate of house price inflation in the UK. In Glasgow, Edinburgh and many other large regional cities affordability is less of a barrier than in London and the south east, particularly for first time buyers, and with mortgage rates remaining low this is helping to stimulate demand and increase activity in these markets.
“As we move into 2018 increases in regional city house prices is likely to offset very low nominal growth in London. There is 20-25% of additional upside in house prices in regional cities with a simple adjustment on affordability metrics. Add to this the impact of lower mortgage rates and the clouds of uncertainty around Brexit seeming set to lift in 2018 and we expect regional cities to continue above average house price growth next year and overall city house price growth to hit 5%.”
