According to the latest Hometrack UK Cities House Price Index report, house price inflation in London has reached its lowest level in five years.
Annual growth among southern cities such as Bristol, Cambridge and Oxford has slowed from double to single digits, due to factors such as:
- Weakened demand in the face of affordability constraints
- Tax changes
- Weaker market sentiment
The rate of growth in London for April was 3.5%, down from 13% this time last year, with further slowing expected towards the end of the year. Hometrack predicted a further drop to below 3%, which is lower than the inflation figure for May, meaning that the house prices in London would result in a real terms drop in price over 2017. This would be the first time this has happened since 2011.
How does this compare to the rest of the UK?
The UK as a whole saw an average drop to 5.3%, down from 8.7% in April 2016. Certain cities in the East and West Midlands saw growth, with:
- Leicester (7.7%)
- Birmingham (7.7%)
- Nottingham (7.2%)
Manchester sits at the top of the table, with a growth of 8.4% during April, up from 6.3% last year.
Richard Donnell, Insight Director at Hometrack, , said: “A further slowdown in southern England is expected as a large number of households are 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.”