House prices surpass pre-crisis peaks for first time since 2007

House prices across all English cities have risen above pre-crisis peaks for the first time since 2007, according to new data published by Zoopla.

The latest Zoopla UK Cities House Price Index revealed the overall annual rate of house price growth across all UK cities – 3.9% from December 2019 to January 2020 – is at its highest for 33 months.

The property expert indicated a pick-up in the headline rate of growth was boosted by increased growth across southern cities, after a broadly flat period of performance during 2019.

The Index showed that all UK cities – apart from Aberdeen that stands at -4.3% – are recording annual house price inflation of at least 2% per annum, for the first time since February 2017. City growth was revealed to be led by highs of 5.9% in Edinburgh, and 5.3% in Nottingham and Leicester.

“It has taken twelve years for house prices in all English cities to return to their previous pre-crisis levels,” Zoopla research and insight director, Richard Donnell, said.

“Some cities returned to 2007 levels within four years, as the economy and job growth rebounded. In others, it has taken much longer as the mismatch between demand and supply has been less pronounced.

“An imbalance between supply and demand is supporting the current rate of house price growth – a trend we expect to remain in place over 2020’s first half. Strong demand and attractive affordability are sustaining above average price growth in Nottingham despite an increase in supply.

“The same will apply to other cities including Liverpool and Manchester. The growth in supply in Oxford and Cambridge is more likely a result of sellers, who were sitting on their hands waiting for market conditions to improve, before eventually deciding to make their move, encouraged by improving housing market sentiment.

“We do not expect a material acceleration in the rate of growth in the foreseeable future, as affordability pressures will limit the scale of price growth, especially across southern England.”

The Index also showed prices in central London, which after two and a half years was the first market where prices surpassed 2007 levels, were buoyed by overseas buyers entering the market – attracted by a major drop in the value of sterling.

Zoopla added that London was followed by southern cities, which returned to pre-crisis levels within seven years – bolstered by rising demand and employment growth.

“There is a risk that, in some markets, sellers may become unrealistic about the expected sales price for their home,” Donnell added.

“This is more likely in London and southern England where the market has been weak, and supply remains constrained. Housing demand is up, but there remains a price sensitivity amongst buyers, especially in the highest value markets.

“The upcoming Budget is a prime opportunity for the new Chancellor to address some of the factors affecting the housing market. Any review of stamp duty charges to help the movement of homeowners up and down the property ladder should be made to boost transaction levels, but the extent and nature of any reform, which must be balanced against political exigencies, remains to be seen.”

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