Property price rises in UK’s biggest cities
It is not only London that is seeing a continued rise in house prices. Several other large cities such as Liverpool, Cardiff and even Southampton have seen a sharp rise during the past year or so. According to a survey by Hometrack, who keep an eye on housing price fluctuations in twenty of the largest cities, the rise has a distinct link to buy-to-let investors. Liverpool tops the table recording a 4.1% rate of growth in prices, all within the first quarter of the year. Taking all the cities into consideration, growth in general is the strongest it has been for a period of twelve years. The majority of the increase was in the middle, to higher end of the market: excluding London.
There is evidence to suggest that an early surge did have something to do with the April Stamp duty changes. Potential landlords rushed to beat the 3% surcharge that was added to extra ownership, beyond a person’s place of residence.
“We believe house prices will continue to rise, but a moderation in investor demand and greater caution in the run up to the EU referendum will limit further acceleration in prices,” said Richard Donnell, Insight Director of Hometrack.
Mortgage lending on the increase
Recent figures from HM Revenue and Customs showed that some 161,990 residences were sold solely in March, the highest figure since 2006. Mortgage lending has also reached a March figure of nearly 26 billion, a staggering 59% above the same period last year. It is expected that there will be a slowing down during the next period.
Another reason for continued price rises is the lack of new builds, causing a backlog of available property and a high demand. The Royal Institute of Chartered Surveyors (Rics) says housebuilding “slowed considerably” over the first part of the year, hindering the government’s agreement to build 200,000 new properties in the next four years.
Bank of Mum and Dad
House buying remains on an upward trend for another interesting reason. Around 300,000 mortgages will be initiated this year, via the “Bank of Mum and Dad”. Parents lend their offspring an average of £17,500 for home buying, providing more than £5bn in finance in the UK this year. 25 percent of mortgage transactions go ahead with family support. Legal & General comments that the money involved would make UK parents a top ten mortgage lender, if they actually were a bank.
One anomaly is that there are several areas in the country such as South Buckinghamshire and the Cotswolds where average wages mean that house prices are even higher exponentially than in the cities. The National Housing Federation (NHF) points out that an average wage in the capital is £39,920 and the average house price £400,000, therefore ten times bigger than wages. In Amersham and Beaconsfield an average home is 20 times the annual local salary and similar in the Cotswolds.
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