Hometrack has revealed in its latest UK Cities House Price Index that over the last six years, London and Oxford have experienced house price growth of 55.2% and 42.1%.
However, Hometrack says affordability pressures will limit growth in the medium term with both cities registering over 12 times the price to earnings ratios, almost twice the UK average of 6.3 times.
By contrast in cities that only started their recovery two years ago such as Edinburgh (10.7%), Leeds (10.1%), Newcastle (8%) and Glasgow (6.3%), house prices are averaging between three and six times the average earnings.
There are 14 UK cities in total that have been recording house price growth since 2009, but the length of the recovery does not provide a guide to the level of house price growth. While London has seen the average house value increase by 55% or £144,000, the rebound in house prices in Manchester and Birmingham have been just over 10% or £12,500 over the same period.
The six cities that have been recovering for the last two-three years have recorded an average increase of just 9% or £11,000 led by Belfast and Edinburgh. The weakest growth has been seen in Glasgow with average prices up 6.3% or £6,300 since July 2012.
Richard Donnell, director of research at Hometrack, said: “A focus on average UK house price movements masks critical trends at a city and sub-regional level. This is important for both businesses operating in the housing market and policy makers trying to address the challenges of growing housing supply.
“House price growth within cities reflects the strength of their local economies and the demand for housing. While Manchester and Birmingham saw prices bottom out in 2009, growth has been more subdued than in other cities where employment growth has been stronger and the influence of the London economy has been greater.
“Elsewhere house prices continue to rise off a low base as pent-up demand returns to the market supported by record low mortgage rates, an improving economic outlook and rising earnings. Existing homeowners remain are reluctant to put their homes on the market, creating scarcity and keeping an upward pressure on prices.
“The outlook for 2015 is a balance between the scale of the affordability driven slowdown in the high value, high growth markets and the continued recovery in lower value markets.”