Manchester house prices soared by 8.9% in the year to December 2016 – the steepest growth in the city for 12 years.
The only UK city with higher price growth is Bristol at 9.6%, although Hometrack expects activity in Bristol to slowdown in 2017.
Richard Donnell, insight director at Hometrack, said: “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.
“Price rises are gaining momentum in cities where low mortgage rates are yet to be fully priced into housing.
“In Manchester the underlying market conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand.
“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.”
Nigel Payne, managing director of TFC Homeloans, which has its head office in Manchester, isn’t surprised the city is performing so well.
He said: “It’s got big business, innovative start-ups, top-class universities and a palpable energy that makes it the most exciting UK city to live and work in right now – not to mention the culture, music and sport.
“The city centre has transformed in the last 25 years and now people, from students to CEOs, call it home.
“Plus, the infrastructure is there to back up the steady population and house price growth the city has seen in recent years, with jobs, transport, shops and hospitals all at hand.
“TFC Homeloans relocated here a year ago and we already feel at home. Like us, the city is growing, ambitious, vibrant and staking its claim as a ‘northern powerhouse’.”
Stephen Smith, director of Legal & General Housing Partnerships, said: “Manchester has replaced London as the UK city where house prices are rising at the fastest rate – a dubious accolade at best!
“Great news for homeowners in the city, perhaps – but not much help to those Mancunians trying to move up the ladder or to buy a starter home for their family.
“More widely, the fact that the average UK city house price fell by 0.5% in 2016 compared to 2015 is no immediate cause for concern to homeowners, nor will it provide much comfort to those trying to get on the ladder.
“Meaningful change will only be achieved by addressing the structural flaws in our housing market.
“With the promise of a Housing White Paper by the end of the month, the government has the perfect opportunity to build on its promises of providing our country with the millions of affordable homes that we so desperately need.”
The only city to see a drop in house prices is Aberdeen with a -3.2% fall, while price growth in Belfast (1.2%) and Cardiff (2.7%) is slow.