According to a recent table produced by Hometrack, house price growth in six of our regional cities is outstripping London, with Manchester (8.9% growth) vying for top spot with Bristol (9.6%). For Manchester, the rate price inflation is at its highest since July 2005. But why is London falling behind in the rankings?
High levels of unaffordability is affecting house price growth in the capital. With average house prices in excess of £580,000, and average salaries about £35,000, many citizens are finding it difficult to obtain a mortgage. House price growth in London is projected to slow further over 2017.
But does this mean that the North-South divide is lessening? Or is that an oversimplification? Three of the other four cities outranking London in house price growth are in the south (Oxford, Portsmouth and Southampton), and Birmingham’s growth (7.5%) is only slightly higher than the capital’s (7.3%). Meanwhile, house prices in Scotland showed noticeably slower growth than London (Glasgow, 4.9%; Edinburgh, 3.7%; and Aberdeen, -3.2%).
So even though the divide isn’t disappearing, it’s true that in Manchester at least market conditions are stronger than in the capital. But what does this mean for Mancunians? It’s a double-edged sword. The supply of homes is just keeping pace with demand, which is maintaining the upward pressure on prices. That’s good news for homeowners, many of whom will have increasing equity in their homes, but less beneficial for first time buyers or those wishing to move up the property ladder, who could find their finances squeezed.
All this could change in the future however. The long-awaited Housing White Paper is expected to detail the Government’s plans to action their pledge to provide a stock of affordable homes across the country. According to market laws of course, increasing the supply should reduce prices. Watch this space….