UK city house price inflation bounced back in 2016 with average values rising 2.2%, up from 0.3% in Q3 when growth was impacted by the Brexit vote.
Growth over 2016 was down slightly compared to 2015 (7.7%) but in line with the average rate over the last 18 months, according to the latest data from Hometrack.
The headline rate of growth masks a clear shift in underlying growth at a city level where the impetus for growth is shifting from London to regional cities with more attractive affordability and headroom for further price inflation.
Manchester recorded the second quickest rate of growth over 2016 at 8.9%. This is the highest rate of growth in the city for over 11.5 years (July 2005).
“As we have highlighted in recent city index reports, underlying market conditions remain strong in Manchester,” Hometrack said. “The supply of homes for sales is only just managing to keep pace with demand which is keeping the upward pressure on prices. The same is true in other regional cities such as Birmingham and points to continued, above average price inflation over 2017.”
Average prices in London increased by 7.3% over the year. This is the lowest annual rate of growth recorded across London for over three years (July 2013). Stretched affordability levels, with the price/earnings ratio at 14x, points to a prolonged period of price re-adjustment in the London housing market over the coming years.
Other cities recording faster growth than London in 2016 include Oxford (8.1%), Portsmouth (8.0%), Southampton (7.9%), and Birmingham (7.5%).