Regional cities are expected to see house prices rise by 20 to 30 per cent, according to new figures from Hometrack.
Hometrack’s latest UK Cities House Price Index found that regional cities would soon begin to the close the gap to London. The capital has seen nominal prices surge by 89 per cent since 2009. Cities such as Edinburgh, Birmingham and Manchester are expected to start to seal this gap.
Oxford and Cambridge have performed strongly, acting as extensions of the London market. Bristol has also grown by 70 per cent. However, other regional cities have seen far slower increases. Prices in Aberdeen were up a mere 6 per cent since 2009, whilst average prices in Newcastle were up only 18 per cent over the same period.
In contrast, average prices in Edinburgh rose 7.7 per cent year on year in January, whilst Birmingham saw a 7.3 per cent increase and Manchester saw growth of 6.7 per cent.
It was found that overall UK city house price inflation is running at 5 per cent. This is up from 4 per cent a year earlier, rendering the average price of a home £211,200.
Hometrack argued that cities outside southern England have further room for house price growth. However, this growth would not match that registered in London since 2009 as the underlying market dynamics are different due to high levels of overseas investment.
Insight director at Hometrack, Richard Donnell, said: ‘We expect to see average house prices rise by 20 per cent to 30 per cent in cities like Edinburgh, Birmingham and Manchester in the next three to four years.’
He explained: ‘The income to buy a home in regional cities is well below the London average, so in the near term we expect to see rising house prices stimulating additional buying and market activity in those areas. House prices have some way to increase before there is a material constraint on demand. This assumes mortgage rates remain low by historic standards and the economy continues to grow.