House price growth in London hit a seven year low with two fifths (42%) of postcodes across London registering year-on-year price falls, the latest Hometrack UK Cities House Price Index found.
The headline rate of house price growth across the capital has slowed to 1%, down from 4.3% a year ago. This is the lowest annual rate of growth since August 2011.
In contrast, regional cities such as Edinburgh, Liverpool and Manchester are registering house price growth in excess of 7% per annum.
Richard Donnell, insight director at Hometrack, said: “The weakness in London’s housing market has been building since 2015 on the back of numerous tax changes aimed at overseas and UK investors and growing affordability pressures facing homeowners.
“Sales volumes are first to be hit when demand weakens and housing turnover across London is down 17% since 2014. Sales prices are next to follow but with few forced sellers the level of price falls remains low.”
The slowdown in the capital is driven by single digit price falls across inner London – 15 of the 46 local authorities that make up the London index are experiencing price falls.
The ones that have seen the greatest downward pressure on prices over the last year are the City of London (7.9%), Camden (1.9%), Southwark (1.8%), Islington (1.4%) and Wandsworth (1.2%).
House prices continue to increase across the majority (58%) of London postcodes but the number registering positive growth has declined over the last 12 months.
Based on current trends, Hometrack expects year-on-year house price growth to shift into negative territory by the middle of 2018.
The Hometrack index reveals that house price growth outside southern England remains robust, well ahead of the growth in earnings. Overall UK city house price inflation is up 5.2% year-on-year as the rate of growth between southern cities and regional cities continues to diverge.
Donnell added: “We expect the balance of markets registering price falls to increase over 2018 as prices continue to adjust to what buyers are prepared to pay. Average London house prices are up 86% on 2009 levels so there is a sizable equity buffer to absorb any price falls.
“Away from southern England house price growth remains robust in regional cities where prices have registered lower overall growth since 2009 and affordability levels are in line with their long run average.”
Half of cities covered by the index are recording higher price growth than a year ago while the other ten are registering lower growth led by Bristol, Southampton and London.
Prices are falling in Cambridge (-1.5) and Aberdeen (-7.7%) – Cambridge is performing like an extension of the London housing market.
There are five cities registering house price growth in excess of 7% – Edinburgh, Liverpool, Leicester, Birmingham and Manchester.
In London, the coverage of markets registering negative house price growth (currently 42%) is at its highest since the global financial crisis.
This is a result of numerous tax changes impacting overseas and domestic investors and stretched affordability levels for owner occupiers that have been compounded by Brexit uncertainty.
The majority of these markets are falling by between 0% and -5% with no signs of any acceleration in the rate of price falls.
The downward pressure on house prices is greatest across inner London areas where prices are highest prices and yields lowest, and where there is a greater share of discretionary buyers.
The time it takes to sell a residential property in inner London has risen to 18 weeks, almost double that of outer London and the city’s commuter areas.