London house price growth hits seven-year low as regional cities power ahead: Hometrack

London price growth is down from 4.3% just a year ago and contrasts with regional cities such as Edinburgh, Liverpool and Manchester which are registering house price growth in excess of 7% per annum.

The slowdown in the capital is primarily driven by single digit price falls across inner London. Fifteen of the 46 local authorities that make up the London index are experiencing price falls.

House prices continue to increase across the majority (58%) of London postcodes but the number registering positive growth has declined over the last 12 months. Based on current trends, Hometrack expects year on year house price growth to shift into negative territory by the middle of 2018.

In contrast, house price growth outside southern England remains robust, well ahead of the growth in earnings. Overall UK city house price inflation is 5.2% year-on-year as the rate of growth between southern cities and regional cities continues to diverge.

Half of cities covered by the index are recording higher price growth than a year ago while ten are registering lower growth, led by Bristol, Southampton and London. Prices are also falling in Aberdeen (-7.7%) and Cambridge (-1.5) which is performing like an extension of the London housing market.

Richard Donnell, insight director at Hometrack, commented: “The weakness in London’s housing market has been building since 2015 on the back of numerous tax changes aimed at overseas and UK investors and growing affordability pressures facing home owners. Sales volumes are first to be hit when demand weakens and housing turnover across London is down 17% since 2014. Sales prices are next to follow but with few forced sellers the level of price falls remains low.

“We expect the balance of markets registering price falls to increase over 2018 as prices continue to adjust to what buyers are prepared to pay. Average London house prices are up 86% on 2009 levels so there is a sizable equity buffer to absorb any price falls.

“Away from southern England house price growth remains robust in regional cities where prices have registered lower overall growth since 2009 and affordability levels are in line with their long run average.”