A number of cities outside of southern England continue to register robust year-on-year house price growth, led by Manchester.
There was a significant slowdown in house price growth across 20 of the largest UK cities in April, owed mainly to cooler market conditions across the south of England, especially in London, new figures show.
The latest Hometrack UK Cities House Price Index reveals that city level property price growth dropped to just 5.3% in April, a major fall from the 8.7% registered in the corresponding month last year.
In London, home price growth has declined from 13% a year ago to just 3.5% in April 2017, reflecting the fact that the property market in the city, which was previously driving house price growth has slowed substantially, especially in prime areas of the city where property prices are typically more expensive.
By the end of this year, Hometrack forecast that price growth in the capital will slow further to possibly as low as 2%, and with the level of inflation increasing this means that London is set to record a real terms fall in home prices over 2017, which if accurate would be the first annual decline since 2011.
Other unaffordable cities in southern England, such as Bristol, Cambridge and Oxford, have also seen the rate of growth slow from double to single digits over the last year, on the back of weaker levels of demand from home owners and investors in the face of affordability constraints, weaker market sentiment, and tax changes, including higher stamp duty costs for those buying additional properties, including buy-to-let investments.
In contrast to the deceleration across much of London and the south of England, house price inflation in other parts of the country, most notably in the north of England, are seeing robust growth, led by Manchester.
The average price of a home in Manchester is up 8.4% year-on-year, and yet the signs are that property prices in the city will increase further on the back of relatively tight housing market supply.
Across the Midlands, many cities are also registering strong levels of property price growth, with Leicester and Birmingham both witnessing a 7.7% rise in home prices, followed by Nottingham, where the average property value has increased by 7.2%.
“Looking ahead we expect current trends to continue with house price growth losing momentum in cities across southern England,” said Richard Donnell, insight director at Hometrack. “This is due to record high housing affordability and subsequently a large numbers of households being priced out of the market.”
He continued: “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.”