London and other southern cities such as Oxford and Cambridge are increasingly becoming buyers’ markets as the gap between asking and achieved prices is widening and sellers are having to accept larger discounts, according to the latest Hometrack UK Cities House Price Index.
In 2014 the average discount from listing price across London was 0.5%. Today this has widened to an average of 4% with the largest discounts of up to 10% being registered in inner London where price falls are most concentrated. The annual rate of house price growth is negative in Oxford (pictured), Cambridge and Aberdeen as weaker demand and economic factors results in lower prices.
In these cities, and London, it is becoming a buyers’ market. The converse is true in large regional cities such as Edinburgh, Birmingham, Manchester and Glasgow where the advantage has shifted towards sellers as the discount from the asking price to sale price continues to narrow.
Birmingham and Manchester have seen the discount more than halve from 6% in 2013 to just 2.7% in 2017. A similar pattern has been recorded in cities outside southern England, supporting Hometrack’s view that there is further upside for house prices in regional cities over 2018.
The Scottish system for selling homes is different to England and Wales with property typically marketed as ‘offers over’ a listing price. Hometrack’s analysis indicates that sales values are at a premium to listings prices. The premium has increased over 2017 to average 4% in Glasgow and 7% in Edinburgh. This is consistent with robust levels of price inflation currently being recorded in these cities and reports of a shortage of homes for sale.
In terms of year on year house price growth, Edinburgh is the UK’s fastest growing city (+8.2%) followed by Birmingham (+7.5%) with Manchester and Glasgow also registering growth in excess of 7% per annum. Aberdeen (-9.9%), Cambridge (-1.4%), Oxford (-0.9%) and London (+1.8%) continue to bring up the rear posting negative growth or in the case of London, growth below the rate of inflation.
Richard Donnell, insight director at Hometrack, said: “The level of discounting provides insight into the strength of underlying demand for housing across UK cities. Asking prices tend to act as the ‘shock absorber’ to softer pricing as demand weakens. However, once discounts get close to 10%, this is when falls in headline prices start to occur.
“These results confirm our view that the housing market is following the pattern registered in previous housing cycles with high rates of growth in London over the first half of the cycle being followed by low growth and an acceleration in regional housing markets as prices recover off a low base. We appear to be at this transition period once again. The gap between the annual growth rate in London (+1.8%) and the average across the large regional cities of Birmingham, Manchester, Edinburgh and Glasgow (7.5%) is widening and at its highest since September 2005.”