Slowdown in the annual rate of price growth in the capital has now bottomed out at 2.8 per cent after hitting a five-year low last month
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 per cent, up from 2.3 per cent last month. There has been consistent month on month price increases averaging 0.5 per cent across London for the last 6 months and average prices are now 1.4 per cent higher over the last three months in the capital.
This stabilisation in the rate of London City house price growth is down to two main factors firstly lower transaction volumes and secondly an absence of forced sellers. Housing turnover across London has fallen by 17 per cent since 2015 as affordability pressures and recent policy changes impact demand. The net result is a low rate of nominal house price growth which we expect to continue for at least the rest of 2017.
Annual house price growth across UK Cities stands at 5.3 per cent compared to 7.4 per cent 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 (eight per cent), Manchester (7.1 per cent) and Nottingham (6.9 per cent) 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 lists to suffer house price falls (-three per cent). Average house prices in the city are now 16 per cent 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.
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 per cent 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 -two per cent. 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 three per cent.”