The latest Hometrack UK Cities House Price Index reveals house price growth in London has fallen to 7.6%, the lowest level for 39 months, as affordability pressures and multiple policy changes aimed at investors weaken demand.
Hometrack predicts growth of 4% over 2017 with above average increases in large regional cities projected to offset low nominal growth in London. The overall headline rate of inflation for the UK Cities House Price Index is currently running at 7.7%, marginally higher than 12 months ago (7.3%), and in line with Hometrack’s projection for 7% capital value growth over 2016.
Transaction volume growth over 2016 is expected to range from +8% to -10% (see Fig.2), reflecting varying underlying market conditions across the UK. The cities where house prices are now decelerating after five years of high growth, such as London, Oxford, Bournemouth, Bristol and Cambridge, are set to record a 5% contraction in sales in 2016. In addition to this, Aberdeen, which is continuing to see house price falls (-6.4% per annum) is also expected to see a similar shift in activity.
In contrast, cities registering sustained growth in house prices are the ones expected to record higher turnover over 2016, with the greatest uplift likely in Birmingham, Leeds, Leicester and Nottingham.
Richard Donnell, Insight Director at Hometrack says: “In London and southern cities homeowners are facing the greatest affordability pressures, while the buoyant investor market has been impacted by fiscal changes, as well as tougher underwriting standards for mortgage borrowers.
“In larger regional UK cities, such as Birmingham and Manchester, affordability remains attractive and we believe there is room for further price growth over 2017. With this in mind, we predict that city level house price growth in 2017 will run slightly higher than the current consensus of 2-3%, however this will largely be driven by the scale of the slowdown in London.”
