Demand is running ahead of supply and boosting prices in the North West city, where annual house prices rose by 8.9%. That’s the highest rate since July 2005.
“In Manchester the underlying market conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand,” said Hometrack insight director Richard Donnell (pictured).
“This is keeping the upward pressure on house prices. A similar picture is emerging in other regional cities such as Birmingham and points to continued, above average price inflation in regional cities over the next 12 months.”
By contrast, demand in London is weakening, with record high unaffordability reducing house price growth. It experienced growth of 7.3% in 2016 – the lowest annual rate for more than three years – and is now the seventh city in the house price growth rankings, behind Bristol, Manchester, Oxford, Portsmouth, Southampton and Birmingham.
In the capital house prices are now on average 14.2 times earnings, which is a record high level of housing unaffordability and points towards a period of price re-adjustment over the coming years.
“This latest UK city house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years, said Donnell.
“Price rises are gaining momentum in cities where low mortgage rates are yet to be fully priced into housing.
“2017 looks set to be a year when the north-south divide for house prices might finally start to narrow once again.”
The headline rate of the Index stands at 7.2%, down from 7.7% in 2015. Growth in the final quarter of the year bounced back (+2.2%) after weak growth over Q3 (+0.3%) following the Brexit vote.
The only city to surpass the growth seen in Manchester was Bristol, where prices increased by 9.6% over the last 12 months, although affordability pressures here are expected to lead to a slowdown in growth in 2017.