By Every city included in the Zoopla property index has recorded an increase in property values in the last 12 months, according to recently released data from the UK property company’s website. For the first time in three and a half years, all 20 UK cities covered in the index have seen price growth, with London recording year-on-year growth of 0.4 per cent and Aberdeen up 1.8 per cent.
There was an overall increase across the cities of 2.8 per cent, which has remained steady year-on-year for the last few years. However, growth registered in specific locations has been much stronger. For instance, Leicester house values rose by 6.8 per cent year on year to February 2019. Also, Manchester is up 5.8 per cent while Glasgow is up 5.7 per cent.
At the other end of the spectrum, Cambridge only recorded a minor increase of just 0.2 per cent, with Oxford prices rising by 1 per cent, Portsmouth by 1.3 per cent and Southampton by 1.5 per cent, according to Zoopla’s property index.
Signs of a pick-up in demand
While market conditions remain weak in London, there are signs of a pick-up in demand, following a three year repricing which has included absolute price falls which have been concentrated in higher-value markets, according to Zoopla. They also highlight a widening in the discount between asking and achieved prices. The largest discounts are currently recorded in Inner London.
House prices are falling across 55 per cent of London postcodes, but this is down from almost 70 per cent last October. The rate at which prices are falling in these markets is also relatively low, at around 5 per cent.
House prices continue to increase in 45 per cent of London postcodes, although these are typically lower-value, more affordable areas in the capital. It suggests that certain buyers, who have been patient since 2015, are starting to see greater value for money. This perhaps feeds into buying opportunities while Brexit uncertainty affects the market, according to Zoopla.
Alignment of buyer and seller expectations
The report points out that a willingness of sellers to be more realistic on pricing and accept offers from buyers has all contributed to the current market sentiment and property prices. Although London prices are not expected to rebound, the closer alignment of buyer and seller expectations is a positive for market activity and sales volumes. These are still 25 per cent lower than in 2016, according to Zoopla.
Regional inflation of house prices
Regional cities outside southern England have recorded above-average price inflation over the last three years. This is a result of better affordability and rising employment, which have all boosted demand, according to Zoopla.
The report also warns however that there could be slower growth in regional cities throughout 2019 as the growth is part of the unfolding housing cycle and house prices cannot keep rising ahead of earnings indefinitely. For instance, it points out that Birmingham and Manchester are starting to lose momentum as there has been a significant increase in the proportion of postcodes registering growth of zero to 5 per cent and fewer areas recording growth over 5 per cent per annum.
Causes of this slowdown are attributed to the result of growing affordability pressures, as well as increased uncertainty. Prices in these cities are now expected to rise at a rate that is closer to earnings growth, with a similar trend to take place in cities such as Bristol, Bournemouth and other areas across southern England, according to Zoopla.
A shift in mentality
Andy Soloman, chief executive officer of Yomdel, believes that there has been a shift in mentality amongst both buyers and sellers who realise if they do wish to sit on the fence until Brexit is finalised, they could be there quite some time. “As a result and much like Brexit, people just want to get on with it now and sellers are adjusting their price expectations in line with the current market climate, while buyers are taking the plunge and proceeding with a purchase. This uplift in demand and market activity has stimulated the market,” he said.
Marc von Grundherr, director at Benham and Reeves, believes it is no real surprise that the London market is starting to bounce back despite Brexit uncertainty still looming and that the pickup is almost certainly being led by opportunistic investors who are taking advantage of the notable price reductions.
Grundherr added: “However, it is only a matter of time before this momentum builds across all London home buyers and postcodes and we see a full return to form. We’ve seen London take the brunt of our political indecision while alternative regional frontrunners like Manchester and Birmingham have been leading the charge of late. However, as these markets start to tire, London’s property pedigree will ensure it remains one of the driving forces of the UK market,”
Overall, the index reflects the underlying strength of the housing market, according to Simon Heawood, chief executive officer of Bricklane. He commented: “Despite great political uncertainty, house prices are rising across the country, even in London, average house price growth is now back to positive territory. With house prices rising above inflation and rental yields further enhancing returns, property continues to represent an attractive investment for many, particularly in the context of rock bottom cash interest rates and stock market volatility.”
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