Quarterly house price growth at 12-year high

The Hometrack data reveals that tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments have pushed investors to search for higher yielding property meaning more investment in lower value cities, with lower buying costs, and further support for continued house price growth.  

Year on year house price growth across UK Cities reached 10.8% outstripping the 8.7% reported across the rest of the UK. The highest increase in the last quarter was recorded in Liverpool as prices rose off a low base and closed the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum - the highest year on year growth since 2007.

Richard Donnell, Insight Director at Hometrack, said:

“The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property and seeking to beat the stamp duty deadline. With that deadline now passed, the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. Especially at a time when home buyers start to consider the implications of the EU referendum for the economy and mortgage rates.

"In the recent past, periods of accelerating house price growth have coincided with changes in market sentiment and demand notably following the introduction of Help to buy in 2013 and after the 2015 General Election. We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU referendum will limit further acceleration in prices. Most likely the rate of growth will slow more rapidly in high value, low yielding cities such as London where prices will be more responsive to weaker investor demand.”

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

“With landlords rushing to complete their buy-to-let purchases ahead of the stamp duty rise, it’s no surprise that these figures show house prices have continued to increase. However, we shouldn’t let this surge distract us from the real issues that are plaguing the housing market. The underlying issue is affordability, and the toxic mix of inadequate supply and rising demand is playing a central role in making homeownership a distant dream for many."