Source : Hometrack @ FT

"MANCHESTER AND BIRMINGHAM PROPERTY PRICES TO RISE 20~30% IN THE NEXT 3~4 YEARS"

Published by James Pickford , Financial Times on 2 MARCH, 2018

Manchester and Birmingham will see rises of 20 to 30 per cent over the next three to four years, based on the shape of the regional economy and the trajectory of the current housing market cycle.

WHAT DOES THE CHART SHOW?

It shows how the UK's property market is anything but homogenous, as different cities registered substantially different rates of growth or decline in nominal house prices over the eight years to 2017.

Splitting the period into four, the data from housing market analysts Hometrack show that London and other southern cities were quickest to recover following the financial crisis.

As the euro came under pressure, overseas investors poured money into London property, pushing up prices over the five years to 2013. But the wider Southeast region — particularly those cities with direct rail links to London — also did well. Cambridge and Oxford registered sharper rises than the capital up to 2011. Further afield, Bristol also outperformed, registering a 70 per cent rise over the eight-year period to 2017.

WHERE HAS PRICE GROWTH BEEN WEAKER?

The period 2014-15 appeared to be the high water mark for London and the Southeast, as surging demand pushed up prices to the limits of affordability for those buying with a mortgage. At the other end of the country, demand remained weak through to 2013 for regional or local economic reasons. At that time, Glasgow and Liverpool were still showing price falls.

But that began to change around two years ago. Richard Donnell, Hometrack research director, said: “More recently we have seen regional cities start to post above-average gains as house price growth gains more traction on the back of rising employment, economic growth and affordability levels that are at or below their long-run average. House prices still do not reflect the full impact of today's low mortgage rates.”

WHICH PLACES ARE NOW COMING UP?

Hometrack identifies Edinburgh as the fastest-growing city in terms of house prices, with annualised growth of 7.7 per cent and an average house price of £218,600, compared with £251,000 for the analyst's index of 20 cities. But other cities in the north and the Midlands — including Birmingham, Manchester, Leicester and Liverpool — all grew by more than 6 per cent year-on-year to January 2018. By contrast, London price growth lags behind at 1.6 per cent for the same period.

IS THAT GROWTH SUSTAINABLE?

Mr Donnell thinks cities such as Manchester and Birmingham will see rises of 20 to 30 per cent over the next three to four years, based on the shape of the regional economy and the trajectory of the current housing market cycle. But the gains seen by London in the past eight years are unlikely to be repeated elsewhere, since other UK cities do not benefit to the same extent from overseas investment in housing.

The London housing market, meanwhile, is set for a more modest period with average prices at £488,000 and mortgages lying beyond the limits of many borrowers. Transaction levels have already fallen by 16 per cent since 2014, Hometrack says, and it anticipates average house prices will “drift lower” in real terms over the next few years.