City house prices grow by 10% annually in July despite Brexit concerns
House prices in the UK’s 20 major cities increased by 10.2% in the last 12 months, according to the latest Hometrack UK Cities House Price Index, the same rate of annual house price growth seen in May 2016 but higher than the 6.9% growth seen 12 months ago in June 2015.
The data suggests that the referendum campaign that concluded with the vote for Brexit on June 23rd had little impact on sales volumes in cities.
However, real insight on the immediate impact of the Brexit vote on city property sales will not be evident yet but should begin to emerge over the next few months.
Hometrack said that because of time lags, official data will be slow to pick up changes as a result of Brexit but expects London “to bear the brunt of any slowdown.”
In the earlier part of the year, demand for property was inflated as investors rushed to buy property before the introduction of a new 3% stamp duty surcharge on 1 April.
The data shows that the property market in London has seen a widening gap between an increase in supply and lower sales, a trend that points towards slower house price growth in the capital in the months ahead.
Richard Donnell, insight director at Hometrack says: “The headwinds that were facing the London market in the lead up to the EU referendum have intensified on the back of the vote to leave and are resulting in slower sales rates.”
The new figures also suggest a growing divide in current house price growth between cities in the north and south of the UK.
Bristol continues to be the fastest-growing city in the UK, with an annual increase of 14.7%, but year-on-year house price growth in London and other cities in the south of England such as Southampton and Cambridge began to slow between May and June 2016.
Meanwhile, large cities in parts of northern England and Scotland have seen prices grow faster, partly due to starting from a lower base. Hometrack said the stronger growth seen in Glasgow, Manchester, Liverpool and Leeds was due to a range of factors including lower interest rates, improving local economies and higher yields making purchases attractive to investors.
“In many large regional cities, sales appear to have held up thanks to a combination of much better housing affordability, improving economic growth and record low mortgage rates helping to stimulate demand,” Donnell adds.
Hometrack said that the data, which runs up to mid-July, shows changes in the balance of supply and sales and provide early insight into turnover trends and whether supply is increasing, which could lower house price growth. New listings have grown faster in the last three months than the average increase in supply in the last 12 months.
In London the data shows a 16% rise in new listings in the last three months, compared to the previous 12 months but an 8% fall in sales, clear evidence of negative pressure on house prices.
However, in Manchester, sales rose by 6% and new listings by just 4%, suggesting house price growth.
Donnell concludes: “The reality is that it is still very early days to assess the true impact of the Brexit vote on the housing market. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year. The early market activity data confirms our view that London will bear the brunt of any slowdown.”