UK house price growth cools, but sales rise

Cambridge, UK, where house price growth is cooling Photo: Geezaweezer

UK house price growth continues to cool in high value cities, ahead of May's election, according to Hoemtrack's latest Cities House Price Index.

The rate of house price inflation reached 10 per cent in the 12 months to February, down from 11.6 per cent six months ago, with house price growth ranging from 3.6 per cent in Newcastle to 12.9 per cent in London.

While high value cities, such as London, Oxford and Cambridge, record cooling prices, though, lower value cities are enjoying a sharp spike in sales activity.

"Rising transaction volumes are an important precursor to house price inflation," observes Hometrack, noting that the 15 per cent to 35 per cent uplift in transactions in 2014 indicates "the most significant recovery in house market activity in cities outside of the South East of England since 2007".

Indeed, Belfast, Leeds, Liverpool and Cardiff all registered a 20 per cent to 39 per cent growth in sales volumes in 2014, compared to the average for the previous five years. Rising demand and increased market activity have resulted in increased house price inflation, which is running at between 5 per cent and 8 per cent.

In more expensive markets, growth in housing transactions in 2014 compared to the past five years was well below average. Sales volumes fell in all the high growth cities over 2014 compared to 2013, specifically -13 per cent in Cambridge, -7 per cent in Aberdeen, -2 per cent in Oxford and -1 per cent in London.

"Falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase," comments the report.

Home owners using a mortgage to buy a home accounted for two thirds of sales in 2014 according to analysis by Hometrack. The remaining third of sales were to cash buyers or those borrowing with a buy-to-let mortgage – groups who are not subject to mortgage affordability tests.

Richard Donnell, Director of Research at residential analysts Hometrack, says: "The ongoing housing recovery is far from broad based and remains focused on higher value areas within cities where households have equity and find it easier to access mortgage finance."