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Prices in UK cities to rise 10% this year

House price growth in the UK's leading cities is set to hit 10% this year as the market recovery continues.

The Hometrack UK Cities Index, published today, shows prices rose by 8.4% over the last 12 months and 4.3% in the last quarter.

It predicts that prices across the 20 cities in the index will rise 10% this year as the recovery spreads and households continue to factor low mortgage rates into house prices.

The greatest risk is an increase in interest rates, recently hinted at by Bank of England governor Mark Carney.

The fastest-growing cities in the first six months of this year were Oxford (8%), London (6.6%) and Glasgow (6.4%)

Northern powerhouse cities such as Leeds, Manchester, Liverpool and Sheffield have all registered a pick-up in growth since 2013, but average prices are still below 2007 level.

Over the last 12 months Cambridge led the way growing 11.6%, against 2.9% in London.

The timing of a rate rise in uncertain, but any upward shift in interest rates would impact market sentiment and reduce the rate of house price growth, Hometrack said.

Richard Donnell, director of research, Hometrack, said: “Rising demand for property against a backdrop of low supply continues to push city level house prices higher.

“At 8.4%, city level house price inflation is running higher than the overall UK rate. While house price growth might moderate slightly in the second half of 2015, it looks increasingly likely that city level house price growth will return to double digits by the year end.”

Donnell added: “The greatest risk facing the housing market is an upward movement in interest rates which would check market sentiment, cool demand and result in a marked slowdown in house price growth.”

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