However the index highlights the dangers of focusing on the UK rate of house price inflation and even regional growth rates. House price inflation varies between markets and whether developing, investing or lending into local housing markets these local differentials are important.
At a city level, the annual rate of growth ranges from 4.1% in Glasgow to 16.3% in Aberdeen. Belfast was the city registering 60% year on year growth in mid 2007 where prices today are 50% below their peak, 2007, levels.
For the last five months the weakest performing cities have been registering positive growth on a rising trend. The impetus for national house price growth is emerging from the lower growth cities where house prices have been recovering for a limited period. Hometrack expect the gap between high and low growth cities to narrow further in the months ahead as house price inflation slows in the higher growth markets.
The profile of the recent recovery in house prices varies across markets. There are two distinct groups of cities - those where house prices bottomed out in 2008/9 and have been recovering for 5-6 years, and cities where prices stopped falling as late as 2013 and the recovery has been shorter, running for the last 2-3 years.
The length of time a city has seen house prices recover is not correlated to the level of house price growth. Fourteen cities saw house prices trough in 2008/9 with the strongest gains in southern England. The lowest growth has been seen in cities such as Manchester and Birmingham where the performance of house prices is more reliant on the local economy and growth in incomes and employment.
The high growth, high value cities have now largely priced in lower mortgage rates and affordability pressures are set to limit the rate of house price inflation. London (13.6), Bristol (10.8%), Oxford (8.6%) and Cambridge (5.3%) are all continuing to register slower house price inflation.
The overall outlook is for continued house price growth but at a lower rate. There are no signs of any price falls at a city level. Demand continues to be stimulated by record low mortgage rates, falling unemployment and rising earnings. A lack of housing for sale will continue to keep an upward pressure on house prices. Hometrack stated that they expect the cities that have under-performed to continue to provide the impetus for house price growth in 2015.
Jeremy Duncombe, Director, Legal & General Mortgage Club, said:
"Today's data confirms that house prices are still rising. However, we are still experiencing a two-speed housing market. There is a wide gap between the rate of growth in different cities, with house prices in Aberdeen rising by 16.3%, and by 13.6% in London in the past year, compared to 4.1 % in Glasgow.
"Demand still far outstrips supply, and the UK needs to build 240,000 new homes each year to enable the market to grow in a more sustainable way and reduce the number of people being priced out of home ownership. The housing crisis needs to remain firmly at the top of the political agenda as we approach the general election.”
