City house price inflation to reach 10%

Large regional cities outside southern England are recording an acceleration in growth off a low base. Glasgow, Manchester and Liverpool are registering the highest rates of annual house price growth since 2007.

Glasgow house prices currently average £110,000, less than half the £229,300 average price across all the 20 cities measured by the Hometrack UK Cities index. House prices in Glasgow stopped falling three years ago and have since risen by 13%. In the last 12 months they are up by 8.3%, which is the highest rate of annual growth across the city since August 2007.

In a similar vein, Manchester house prices have been recovering since 2012 and average house prices have risen by 17% over this time to £141,200. In the last 12 months house prices across Manchester have grown by 7.0%, the highest rate of growth since July 2007.

Liverpool has registered the weakest house price performance of all the British cities covered by the index since the global financial crisis. House prices declined between 2007 and early 2013 and have since increased by just 10.5%. In the last 12 month year on year growth has risen to 5.1%, the highest since August 2007. Despite this modest recovery, the average price of £109,800 is still 13% lower than the 2007 peak.  

The tentative recovery in large regional cities contrasts strongly with the rise of London house prices where average prices are up by 70% since 2009 (and by over 100% in the highest value markets). It is these high value markets that are now recording some of the weakest levels of house price growth (Kensington and Chelsea -2.6%, City of Westminster +1.3%) as tax and currency changes impact demand after a period of stellar price appreciation.

Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:

“Demand is continuing to outstrip supply across the UK which is pushing many prospective buyers out of the market. Vastly inconsistent house price growth in different regions is damaging for the overall health of the market as it forces people away from their preferred location of choice, meaning that many may have to move away from family and friends in order to own their own home.

In order to subvert this trend we need to build at least 250,000 more homes per year and bring supply in line with demand. Equally as important is building those homes in the right places, ensuring that there are enough properties to buy in all regions of the country.”