UK city house price growth is running at +1.8% as the rate of price inflation continues to lose momentum. The annual growth ranges from a high of 5.0% to -4% in Aberdeen. Residential values continue to fall in London and Cambridge while the rate of growth weakens across southern England.
These trends are a result of market fundamentals. Specifically, evolving affordability dynamics and the impact of successive tax changes since 2015.
First-time buyers are the largest group of buyers, accounting for 36% of sales. The report finds that the gross household income required by a first-time buyer to buy a typical city home has increased over the last three years by £4,500 or 9% to £54,400.
The income to buy ranges widely from a low of £26,000 in lower value cities such as Liverpool and Glasgow to a high of £84,000 in London. The income to buy across the three most expensive cities has fallen 5% since 2016. This is a result of a small fall in prices and a 0.5% decline in average mortgage rates since 2016.
Over the last 23 years city house prices have increased at an annual average rate of 7%, well ahead of the growth in incomes. This out-performance is largely a result of lower mortgage rates which averaged 5.5% for first time buyers between 1996 and 2007 and are now 2.4%.
The fundamentals of housing affordability and mortgage regulation mean we expect house price inflation to continue to slow across southern England.
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