"We expect to see average house prices rise by 20% to 30% in cities like Edinburgh, Birmingham and Manchester in the next three to four years. "
Since 2009, average house prices in London have risen by 86% while Oxford and Cambridge have also performed strongly, followed by Bristol with growth of 70%.
Yet in Aberdeen average house prices are just 6% higher over the same period and 18% higher in Newcastle.
However while regional cities have lagged the London market they are now starting to close the gap. Currently Edinburgh (7.7%), Birmingham (7.3%) and Manchester (6.7%) lead the way with above average year on year house price inflation. In contrast, the pace of growth in the capital has slowed to 1.6% year on year meaning house prices in London are falling in real terms.
Hometrack expects average house prices in London to drift lower in real terms in the coming 2-3 years with lower turnover (down 16% since 2014) creating scarcity and supporting price levels.
Overall UK city house price inflation is running at 5% up from 4% a year ago.
Richard Donnell, insight director at Hometrack, said: “We expect to see average house prices rise by 20% to 30% in cities like Edinburgh, Birmingham and Manchester in the next three to four years. 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 to continues to grow.”
Founder and CEO of Emoov, Russell Quirk, commented: "Despite the Beast from the East bringing a cold snap weather-wise, demand for city living and resulting house price growth continues to thaw as the discounts required in asking price to secure a sale closes further.
"The UK remains a vast and varied landscape in terms of the property market and it is interesting to see how this also relates to the recovery time of each city since the end of the downfall in 2009.
"We've seen a modern-day tortoise and the hare tale as those cities, like London, that saw a rapid return in property prices in the more immediate aftermath of the market crash, are now paying the price in slower market conditions.
"At the same time, those larger regional cities that have required a much longer recovery period are now pulling away where price growth is concerned and have become a much more attractive proposition for buyers."
