27 Apr House prices in key cities growing faster than UK as a whole
Article in PropertyWire 27 April 2016 (reproduced with permission of PropertyWire)
House prices growth in key cities in the UK was 4.2% higher in the first quarter of this year, the highest for 12 years, the latest index shows.
The normal seasonal upturn in demand was boosted by investors rushing to beat the stamp duty deadline in April which saw a 3% rate on buy to let properties and second homes, according to the cities house price index from Hometrack.
It suggests that tougher lending criteria and tax changes are likely to push investors into higher yielding, lower priced markets, and city level house price growth is expected to moderate in the second quarter of the year.
Overall the annual growth for the 20 city house price index is running at 10.8%, ahead of 8.7% across the UK as a whole, the data also shows.
Liverpool recorded the fastest increase in the first quarter of the year but the index report explains that this was due to priced rising off a low base. But it does mean that Liverpool is
closing the gap to other major cities such as Manchester and Leeds where house price growth is running at over 7% per annum, the highest year on year growth since 2007.
‘The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property. Tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments are likely to push investors to search for higher yielding property which means more focus of investor demand in lower value cities, with lower buying costs, and further support for house price growth,’ the report says.
‘With the rush to beat the stamp duty deadline now over, the question is how weaker investor demand will impact house price inflation in the second quarter of 2016. This at a time when home buyers start to consider the implications of the European Union referendum for the economy and mortgage rates,’ it points out.
‘We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU vote will limit further acceleration in house prices. We expect the rate of house price growth to slow more rapidly in high value, low yielding cities such as London where house prices will be more responsive to weaker investor demand,’ it adds.