Manchester beats Leeds, but it’s all good news for the North
Sharon Dale, Property Editor
However, the average house price in Yorkshire’s most economically vibrant city is still higher at £153,400, whereas in Manchester it is £151,200.
This small difference is one of the reasons for Manchester’s remarkable annual rise, according to Richard Donnell, Insight Director at Hometrack.
He says that property investors are attracted to Manchester’s lowest value areas, where rental yields are high.
“When we say city, what we mean is city region and Manchester is bigger than
Leeds and therefore offers more investor opportunities and more affordable areas for home buyers.”
He adds that a lack of supply and high demand has pushed up prices, and points to the pace of regeneration in Manchester and a go-ahead city council, which has forged partnerships with developers to deliver new housing.
Sheffield, the only other Yorkshire city included in the index saw a 4.3 per cent increase in house prices.
Residential property values in all Britain’s cities rose in 2016 as demand ran ahead of supply. Meanwhile, weakening demand and record high unaffordability in London continues to reduce the rate of house price growth.
The headline rate of the Hometrack UK Cities House Price Index stands at 7.2 per cent, down from 7.7 per cent in 2015. Growth in the final quarter of the year bounced back by 2.2 per cent after weak growth over the third quarter following the Brexit vote.
London prices rose by 7.3 per cent over 2016. This is the lowest annual rate for more than three years. Richard Donnell believes this is why the impetus for house price growth is shifting from the capital to regional cities.
London is now the seventh ranked city in Hometrack’s house price growth rankings.
Other cities to outperform the capital over the last 12 months include Oxford, where prices grew by 8.1 per cent, Portsmouth 8.0 per cent, Southampton 7.9 per cent and Birmingham 7.5 per cent.
In London, house prices are now an average 14.2 times earnings, which is a record high level of housing unaffordability and Hometrack say this points towards a period of price readjustment over the coming years.
Richard Donnell says: “This latest UK city house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years.
“In Manchester, the underlying market conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand. This is keeping the upward pressure on house prices. A similar picture is emerging in other regional cities and points to continued, above average price inflation in regional cities over the next 12 months.”
He predicts that 2017 will be a year when the north-south divide in house prices may narrow once again. “Developers are looking outside London and the South East to Birmingham and the North where there is better affordability and so are buyers. Young people are thinking ‘what’s the point of working in London where we’ll have to live like students, when we can get a job or set up a business in the north, where we can afford a home.”