London-led bounce supports city house prices as regional markets slow

The data shows that London prices have increased by 1% in the past year, the highest rate of growth for two years, following a period of year-on-year price falls.

House prices are now registering monthly falls in less than a quarter of London’s housing markets – well below the 85% of markets registering price falls a year ago and the lowest coverage of price falls since May 2017.

However the shift in London house price momentum is largely due to a decrease in the number of new properties for sale, which has restricted supply. This is a trend that has been developing for the last 12 months and has been accelerated by the announcement of the election on 12th December.

More realistically priced homes are the final ingredient supporting improved market conditions in London. In early 2016, when demand started to weaken, the market grappled with a 20% gap between the price of new listings coming to the market for sale and the price of property being marked as sold on Zoopla. This gap has steadily closed over the last four years to a more sustainable level of 5%, which Zoopla believes will support growth in the number of sales in London over 2020.

However elsewhere, large regional cities are starting to show signs of slower growth. House price growth since the start of 2017 has exceeded 15% across Edinburgh, Leicester, Manchester and Birmingham, but all the cities covered by the index are now registering price growth of less than 5% per annum. This is the first-time growth across all cities has been below 5% since November 2012.

Richard Donnell, research and insight director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life. The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.

“While the London housing market has been in the doldrums, market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability. The rate of growth is slowing, and all cities are registering annual growth of less than 5%.

“The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”