Manchester is currently seeing the fastest house price growth in the UK with property values rising 8.8% in the last year, according to a new report.
The latest Hometrack Cities House Price Index shows that house price inflation in London slowed to 5.6% – the lowest level since May 2013.
While house price growth has gone up 85% since 2009 in the capital, it is expected to grind to a halt later in the year, hitting 0% by the end of 2017.
The headline rate of growth for the UK Cities House Price Index is now running at 6.4% across the country compared to 7.8% in 2016.
Affordability pressures continue to bite in high value cities in southern England while the supply and demand dynamics are not strong enough in many regional cities outside the south to support double digit rates of house price growth.
As a result of weaker investor demand, the impact of the Brexit vote on buyer sentiment and stretched affordability levels, turnover has been flat or falling in the highest value, least affordable cities like London and Bristol.
Sales levels in these cities peaked in 2014/2015 and in London overall sales volumes are now down 8% since 2015.
Meanwhile Manchester and other regional cities such as Liverpool, Leicester and Birmingham have recorded significant surges in transaction volumes of between 30%-40% over the past three years as buyers return to the market supported by an improving jobs market and record low mortgage rates.
Richard Donnell, insight director at Hometrack said: “Levels of housing turnover across UK cities are expected to remain broadly flat over 2017. There is some further upside for sales volume in regional cities but much depends upon how would be buyers respond to external factors, not least the impact of lower real wage growth, the potential for higher mortgage rates and whether demand will be impacted by the triggering of Article 50 at the end of the month.
“Buyers are fully aware of the government’s plans and timescales for Brexit but there remains huge uncertainty over what this means for the economy over the next two to three years and beyond. In cities where affordability remains attractive we expect demand to hold up in the short term albeit with slower growth in sales volumes. Overall we continue to expect the rate of house price growth to moderate over the rest of 2017.”
Jeremy Duncombe, director of Legal & General Mortgage Club, said: “The London vs rest of the UK house price growth mismatch continues to rebalance. It is reassuring to see that the gap between house price growth in the capital and the regions is finally starting to correct itself.
“However, over the course of the last year increases in the price of property have left wage rises far behind. According to Hometrack’s 20 City Index, house prices in Britain’s major urban areas have increased by £13,300 since March 2016. By contrast, UK wages have risen by just £8 per week between January 2016 and January 2017.
“And the structural issues remain. A rethink on stamp duty and developing those areas of the green belt which are little more than scrubland would go some way to further restructuring the UK housing market to better serve our housing needs.”
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