The latest Hometrack UK Cities House Price Index reveals that a 12 month slowdown in London house price growth has ‘bottomed out’ with the annual growth rate rising to at 2.8%, up from 2.3% last month.
Richard Donnell, research and insight director at Hometrack, said: “The London housing market has registered a rapid deceleration in house price growth since the start of 2016 as affordability pressures impact demand and the Brexit vote adversely affected housing market sentiment.
“Turnover is down 15% from the recent high recorded in 2015 and sellers are slow to accept downward adjustments in prices in the face of weaker, price sensitive demand.”
The downward pressure on prices is greatest in the most expensive parts of the capital where demand has been weaker since the end of 2014. These inner London markets are registering small year on year price falls of up to -2%. The downward pricing pressure is less evident in the lowest value markets of London which have registered above average growth and price inflation of over 3%.
Donnell added: “There remains a clear divide between the prospects for house price growth in regional cities, where affordability levels are attractive, and the prospects for house price growth in London and other high value cities in southern England.
“We expect house price growth in regional cities to be sustained at current levels for the rest of 2017 whereas London is set for a sustained period of low nominal house price growth and lower sales volumes.”
Annual house price growth across UK Cities stands at 5.3% compared to 7.4% in July 2016. Growth has picked up in recent months on faster rate of monthly price increases and continues to remain robust in regional cities. Birmingham (8%), Manchester (7.1%) and Nottingham (6.9%) are the UK’s fastest growing cities this month. Growth has been consistent for the last year in Birmingham and Manchester as prices rise off strong demand and attractive affordability.
Meanwhile Aberdeen remains the only UK city in the top 20 list to suffer house price falls (-3%). Average house prices in the city are now 16% lower than they were in December 2014 as the fall in the oil price impacted the local economy. Aberdeen’s housing market serves as a warning to the rest of the UK about the potential for macro-economic factors to have a negative impact on an over exposed local economy.