City house prices "starting to see the brakes applied": Zoopla

Leicester posted the highest level of year-on-year growth in August of just 4.8%, while property values in other cities continued to fall.

This is the first time since 2012 that the fastest growth city has a rate of price inflation below 5%.

Zoopla says an exodus of cash buyers – typically a mix of homeowners and investors – has undermined house price growth in cities across southern England.

This could perhaps be attributed to the higher stamp duty rates introduced in 2016 for those purchasing buy-to-let properties or second home, said the report.

But demand from those buying with a mortgage has been more resilient with numbers growing year-on-year.

Meanwhile, there continue to be wide variations between the current valuation of house prices relative to their 2007 peak. The average home in London now costs 56% more than it did in 2007, while homes in Belfast are still 40% lower than their previous peak.

Richard Donnell, research and insight director at Zoopla, commented: “The housing market is throwing off mixed signals as the headline rate of price growth slows yet demand from home-owners using a mortgage continues to increase. This is at a time when Brexit is dominating the headlines again and further complicating the outlook.

“Despite increased uncertainty, demand from mortgaged home-owners appears resilient, with demand supported by low mortgage rates, high levels of employment, and households who want a home.

“A change in the mix of buyers has impacted the demand for housing across cities since 2016. The reduction in cash buyers has been marked in southern cities and we believe this is down to a decline in investment-buying across high value cities. This has compounded the slowdown in price rises, which we see as a return to a more sustainable pace of price growth rather than an impending re-correction.

“The London market continues to see greater realism in pricing and there are signs of a modest increase in market activity. This isn’t a precursor to price rises, but we do expect sales volumes to start rising once again.”