City house price inflation is being sustained by above average growth in regional cities while prices in London have stabilised but are falling in real terms. New analysis finds the value of housing across UK cities exceeding £3 trillion of which two thirds is accounted for by London.
City house price growth 4.9% yoy
UK City house price inflation is running at 4.9% compared to 6.6% in August 2016 (fig. 1). After weak growth over 2016H2, the 3 month growth rate has increased over recent months.
Falling unemployment and record low mortgage rates are supporting demand as house prices in large regional cities continue to increase off a low base (fig.2). Manchester is the fastest growing city (7.3%), followed by Birmingham (6.7%) and Edinburgh (6.6%).
In contrast, low house price inflation in London is acting as a drag on the headline rate of growth. House prices in London are currently falling in real terms. The nominal growth rate of 1.9% is below the general rate of inflation (2.9%, CPI). Other high capital value cities such as Cambridge and Oxford have also registered a steep slowdown in the rate of price inflation over the last 12 months as affordability pressures constrain housing demand.
Value of housing across UK cities exceeds £3.0trn
Residential values have been rising for eight years, boosting the total value of homes and the amount of equity locked up in housing. Using Hometrack’s automated valuation model we estimate that the total market value of private housing across the 20 city index is £3.013 trillion (£3,013bn). This is 43% of the value of the whole UK housing market (£7trn or £7,000bn). The value of housing in UK cities has grown by £89bn over the last 12 months.
London City, which covers London and its commuter hinterland, contains 39% of the homes across the 20 city index but accounts for 66% of the total value of housing (£2.0trn or £2,000bn). Birmingham (£152bn) and Manchester (£133bn) are the next highest value cities, together accounting for 10% the value of housing within UK cities. To put these numbers in context, the market capitalisation of FTSE 100 companies stands at £1.9trn while total mortgage debt is £1.322trn.
Housing equity in cities exceeds £2.4trn