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Option Homes Ltd - News- Key Cities Price Growth Faster than UK Average

Key Cities Price Growth Faster than UK Average

Date Added 24/05/2016

Key cities around the UK saw a 4.2% increase in house prices during the first quarter of the year, according to the latest cities` house price index from residential property market specialist, Hometrack.

This is the highest seasonal upturn since 2004, with the demand increase caused by many investors looking to beat the deadline of April 1st which saw the rise of Stamp Duty by 3% on any properties that are purchased with the intention of letting them out or simply to be held as second homes. The report suggests that city house price growth is likely to drop off significantly during the second quarter of the year, with many investors choosing to speculate in the lower priced markets which have potential for a higher yield.

City House Prices Rising Higher than UK as a Whole

The report also shows that the house prices in twenty main UK cities have risen by 10.8%, which is 2.1% higher than the overall UK average, which is just 8.7%. Cities such as Leeds and Manchester are seeing house price growth grow at 7% annually, which is the highest year-on-year growth since 2007. However, it is the city of Liverpool which has recorded the fastest increase out of all the UK`s cities during the first quarter of 2016, though this is largely to do with the city starting from a much lower base than its rivals.

Weaker Investor Demand May Impact House Price Inflation

The Hometrack UK Cities House Price Index report states:

`The acceleration in growth in the last quarter has, in part, been down to stronger demand from investors, especially those searching for higher yielding property. Tougher lending criteria for buy to let investors and changes to tax relief on mortgage interest payments are likely to push investors to search for higher yielding property which means more focus of investor demand in lower value cities, with lower buying costs, and further support for house price growth. With the rush to beat the stamp duty deadline now over, the question is how weaker investor demand will impact house price inflation in the 2nd quarter of 2016.`

The report continues:

`This is at a time when home buyers start to consider the implications of the European Union referendum for the economy and mortgage rates. We believe house prices will continue to rise but a moderation in investor demand and greater caution in the run up to the EU vote will limit further acceleration in house prices. We expect the rate of house price growth to slow more rapidly in high value, low yielding cities such as London where house prices will be more responsive to weaker investor demand.`
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