House prices in the cities have risen 9.2% since January with Sheffield, Southampton and Leeds all gaining ground

House prices in UK cities have risen by 9.2 per cent since the start of the year, with demand for urban property surging after the end of the Covid-19 pandemic.

In contrast, homes in the peri-urban suburbs rose just 7.9 percent over the same period, indicating that the “race for space” outside the cities is over, according to Halifax.

The pandemic has created demand for larger properties outside of the urban central areas, with more indoor and outdoor space and better value for money.

Meanwhile, properties within the city with less land area and less green surroundings have been popular with buyers.

However, the perceived end of the Covid pandemic seems to have retained this trend.

Andrew Assam, director of mortgages in Halifax, said: “The pandemic has transformed the UK housing market. Homeowners wanted bigger homes and better access to green spaces, which has driven demand for larger properties away from urban centres.

This accelerated home price growth in the suburbs and rural areas, while it was much slower in cities.

This trend has not completely disappeared this year, as home price growth in these areas has remained strong. But as daily life returns to normal for many, the opportunity to live in cities is becoming more attractive once again, driving up demand.

However, he added, the change in economic conditions caused by the cost-of-living crisis is now putting “downward pressure on the overall housing market.”

Sheffield had the biggest house price inflation this year, with prices rising 18.9 per cent to £228,353, just below the current UK city average of £238,144 according to Halifax.

Looking at areas around the city, Doncaster saw prices rise by 18.3 per cent, while Bassetlaw only saw growth of 3.4 per cent.

Other major city risers included Southampton, where house prices grew 16.2 per cent to £240,459, Leeds, which rose 13.6 per cent to £226,923, and Edinburgh, which rose 12.9 per cent to £276,831.

Jeremy Leaf, a North London estate agent and former RICS Chairman, says: ‘There is no doubt that the pandemic has dramatically changed many people’s attitude towards their homes. The desire to find properties with more space inside and out has often led them to move out of cities to the suburbs and beyond.

However, since restrictions have eased and more have returned to work, demand for proximity to the center has increased and with it housing prices. There seems to be a much greater balance in the market now than there was a few months ago although the recent turmoil in the mortgage market and cost of living pressures may of course add another twist.

According to the latest Halifax House Price Index, the median home value across all UK locations grew by 9.9 per cent in the year to September.

Suburban areas that saw high price growth included Amber Valley in Derbyshire where prices grew by 17.9 per cent, and Walsall in the West Midlands, which rose by 16.4 per cent.

Chris Drews, Senior Research Analyst at Knight Frank, commented: ‘After reopening the economy after lockdown, town and city markets have performed strongly as people have recognized the value and the amenities and entertainment they offer.

Last year the number of Knight Frank sales in regional towns and cities, as a percentage of all UK sales outside London, was 40 per cent, up from 38 per cent in 2020.

“Year to date this has accelerated to 44 per cent of all Knight Frank sales in the UK outside of London.”

House prices in London have grown by 6.8 per cent since January, well below the national city average of 9.2 per cent. Homes in areas around the capital saw a just 4.6 percent increase in prices.

While home price growth has held steady so far this year, the rising cost of mortgages and cost-of-living pressures have led experts to speculate that a recession is ahead.

Data from HMRC shows that monthly real estate transaction levels in September remained flat month on month but were down 32 per cent compared to the previous year.

Lev added: “Nothing reflects the health of the housing market better than the number and speed of transactions rather than the more volatile prices.

Interestingly, the slightly historical nature of these latest numbers reflects how activity had begun to stall even before the shocking events at the end of September. After the mini budget it felt like someone had turned off the phones in our offices which we are only slowly recovering from as the uncertainty still remains.

“However, there is a lot of determination to take advantage of more advantageous lending terms before interest rates rise any further.”

Last week, the average fixed rate for a two-year fixed-rate mortgage across all loans-to-value rose to 6.53 per cent, a day after new chancellor Jeremy Hunt returned much of the government’s tax cut package.

The average rate for five-year fixed deals also rose to 6.36 percent, although it declined slightly to below 6.30 percent at the end of last week, according to financial information service Moneyfacts.

The last time the average two-year fixed mortgage was 6.4 percent or more was in August 2008 during the fallout from the global financial meltdown when it reached 6.94 percent.