New data shows
The latest Hometrack UK Cities House Price Index reveals that city level house price growth has dropped to 5.3 per cent a significant slowdown from the 8.7 per cent registered in April 2016.
In London, the contrast in house price growth from now and 12 months ago is stark, falling from 13 per cent a year ago to just 3.5 per cent in April 2017.
The most unaffordable cities in southern England, such as Bristol, Cambridge, Oxford and London have all seen the rate of growth slow from double to single digits over the last year. This steep deceleration reflects weaker levels of demand from home owners and investors in the face of affordability constraints, tax changes and weaker market sentiment.
Elsewhere, eleven of the twenty cities that form part of the UK Cities Index are registering higher growth than at the same time a year ago. Manchester continues to register the fastest rate of growth at 8.4 per cent, up from 6.3 per cent a year ago. The ratio of sales to new supply in Manchester indicates relatively tight housing market supply which points to continued upward pressure on house prices.
Across the Midlands, many cities are registering robust, above average growth including Leicester, Birmingham and Nottingham. House price inflation in these cities has now surpassed the previously high growth cities such as Bristol and London, as the dynamics of the UK housing market continue to shift.
By the end of 2017, Hometrack expects house price growth in London to slow further to between two and three per cent. With the level of inflation increasing this means the capital is set to record a real terms drop in prices over 2017, the first time this has happened since 2011.
Richard Donnell, insight director at Hometrack says: “Looking ahead we expect current trends to continue with house price growth losing momentum in cities across southern England. This is due to record high housing affordability and subsequently a large numbers of households being priced out of the market.
“Outside southern England, we anticipate prices will continue to increase over 2017 as households take advantage of record low mortgage rates and an improving economic outlook. On paper there still remains material upside for prices in the Midlands, northern England and Scotland but much depends on how market sentiment is impacted by factors such as the General Election, Brexit negotiations and rising inflation which will create a decline in real wage growth.”