The latest figures released by Zoopla have revealed that that house price growth across UK Cities has hit a two year high of +3.9%.
The increase in house price inflation follows flat to falling house prices in the latter parts of 2018 and has been bolstered by a surge in buyer demand, with HMRC data highlighting sales transactions in December 2019 were up 11% compared to December 2018.
Surge in buyer demand across UK Cities
Traditionally, buyers return to the housing market in the first weeks of the New Year and 2020 has proved no different. Zoopla’s analysis found buyer demand in the first weeks of 2020 (23rd December 2019 – 19th January 2020) was +26% higher than the same four-week period in 2019 and 2018. With the exception of Belfast, every UK City recorded an increase in demand from buyers over this time.
Cities in the Midlands and north of England have recorded the strongest interest from buyers so far this year, with Sheffield, Leeds and Leicester recording above-average increases in buyer interest, at up to 20% higher than the average.
Richard Donnell, Research and Insight Director at Zoopla, comments: “Whilst the first few weeks of the year always see a return of home buyers to the housing market, demand for housing at the start of 2020 is 26% higher than over the last two years. This is partially due to fading political uncertainty; households who were holding off moving are now starting to return to the market and this momentum has been supported by low mortgage rates. The cities with more affordable house prices, such as Sheffield and Leeds, have seen the greatest increase in buyer demand as house hunters continue to focus on value for money this year.”
Fastest growing cities of 2020 revealed
Zoopla’s latest report also presents a comprehensive analysis of the UK Cities with the strongest market fundamentals going into 2020 (see table 1). Using a range of metrics - including housing affordability, the position of each city in the current housing cycle, discounts to asking price and time to sell – Zoopla has ranked cities with the best prospects for house price inflation in the year ahead. Cities outside the south of England topped the rankings thanks, largely, to attractive affordability.
Nottingham, where house price inflation is currently running at +5.2%, is ranked as the strongest prospect for house price growth this year. Edinburgh and Glasgow are ranked second and third respectively. House prices are currently sitting at an average of £242,200 in the Scottish capital and the rate of price growth in the 12 months to December 2019 was recorded at an impressive 6.1% here.
Cities in the south of England, such as Southampton, Oxford and London are expected to see house price growth underperform the average this year. This is predominantly due to affordability constraints in these areas following strong house price growth between 2010 and 2016. Whilst London ranks 16th in the Zoopla analysis, sales volumes are expected to rise faster than prices as buyer confidence improves, boosting sales rather than price levels.
Richard concludes: “Regional cities continue to lead the way for house price inflation this year thanks to continued economic growth and more attractive affordability of housing. The best prospects for house price growth in 2020 are in Nottingham, Edinburgh, Glasgow and Manchester.
"In contrast, we expect cities in southern England to register below-average price growth as affordability levels realign to what buyers can afford. Overall, we are expecting house prices to grow on average by +3% across all UK Cities in 2020.”