The North-South divide looks set to narrow as Edinburgh, Birmingham and Manchester prepare for a surge in house prices.
Data published in the latest Hometrack UK Cities House Price Index revealed large regional cities could see increases of 20% to 30% in the next four years.
While London has been streets ahead when it comes to elevating prices, experiencing an 86% rise since 2009, the price of homes in the capital is currently falling in real terms.
Hometrack’s figures show the rate of growth in London had slackened to 1.6% year on year. Yet Edinburgh has just seen year-on-year growth of 7.7%, in Birmingham it has been 7.3% and it is 7.3% in Manchester.
Although Hometrack does not expect these other cities to see rises at the same pace as those in London in the last nine years, it has questioned the sustainability of the capital’s house pricing because of low gross yields and affordability levels being so high.
Richard Donnell, insight director at Hometrack, said: “We expect to see average house prices rise by 20% to 30% in cities like Edinburgh, Birmingham and Manchester in the next three to four years.
“The income to buy a home in regional cities is well below the London average so in the near term we expect to see rising house prices stimulating additional buying and market activity in those areas.
“House prices have some way to increase before there is a material constraint on demand,” he added.
Meanwhile, Jeremy Duncombe, director of the Legal & General Mortgage Club, said the fact house prices were increasing at a more sustainable level was good news for first-time buyers. However, he said the North-South divide was still clear in terms of affordability.
He added: “Although weak house price growth in London is counteracting the strong growth of the Northern Powerhouses, buying in the capital is still considered out of reach by many.”
