Halifax says there is a 7% premium for UK city homes

Sunday, October 02, 2011 11:02 AM

The premium that homebuyers are required to pay to live in one of the UK’s cities has risen to its highest ever level, according to The Halifax Cities Review.

The review tracks movement’s in house prices across 59 cities in the UK and it shows that house prices in cities are on average seven per cent higher than the average for the county the city is a part of. This represents the highest premium since the Halifax started recording data for their house price index in 1983.

Overall, house prices in UK cities have risen by 65 per cent since 2001, from £104,681 in August 2001 to £172,917 in August 2011. This equates to a weekly increase of £131. By contrast, house prices for all types of home across the UK have increased by 56 per cent over the same period.

Westminster in London is the city with the most expensive homes. The average price is £570,964, followed by Winchester at £363,556. All of the top ten cities for house prices are in the South. Edinburgh, at £206,303 has the highest average cost of a city home outside of Southern England.

Salford has the cheapest city homes, with an average cost of £105,833. Portsmouth is the cheapest city for property in the South of England, the average cost being £141,871.

The extra costs that homebuyers are expected to pay is most pronounced in Southern England. Seven out of the ten cities with the highest premium are in the south. Winchester tops the list with a house costing 77 per cent more than the average for Hampshire as a whole. Westminster comes in next with property available at 74 per cent more than the average for Greater London. Lichfield in Staffordshire has the highest premium, 58 per cent, outside of Southern England.

There are a few exceptions. Some cities have average house prices that come in less than the cost in the county. Portsmouth, where the average house price is £141,871, is 31 per cent cheaper than the average cost of a house in the rest of Hampshire.

Read more: Terraced house prices up £118pw

The largest proportional increases in house prices have come in cities away from the South of England. Inverness in Scotland has seen its prices rise by 148 per cent in a decade, whilst Hull has seen a 119 per cent price rise.

During the downturn which has seen a slight fall in average house prices across the UK, homes in city areas have been less affected. City house prices fell by an average of 17 per cent between 2007 and 2009, compared with a fall of 24 per cent across the UK.

Meanwhile, affordability of buying a home in a city has increased. The typical city home will now cost 5.2 times annual earnings compared to 4.8 in 2001. This ratio has improved in the last four years, down from 7.2 in 2007.

Suren Thiru, housing economist at Halifax, said:"With the housing demand and supply imbalance that characterises the UK property market often more acute within our major urban conurbations, homes in cities across the country are typically trading at a marked premium over neighbouring areas."

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SOURCE - http://www.myfinances.co.uk/mortgages/2011/10/02/halifax-says-there-is-a-7-premium-for-uk-city-homes