There has been a sharp slowdown in city house price growth in the wake of falling demand, affordability constraints, tax changes and weaker market sentiment.
According to the latest Hometrack UK Cities House Price Index, city house price growth dropped to 5.3% in April, a significant slowdown from the 8.7% registered a year ago.
In London, house price growth in the last 12 months has plummeted from 13.0% to just 3.5%.
The most unaffordable cities in southern England, such as Bristol, Cambridge, Oxford and London have all seen the rate of growth slow from double to single digits over the last year.
This steep deceleration reflects weaker levels of demand in the face of affordability constraints, tax changes and weaker market sentiment.
Eleven of the 20 cities that form part of the UK Cities Index are registering higher growth than at the same time a year ago.
Manchester continues to register the fastest rate of growth at 8.4%, up from 6.3% a year ago. The ratio of sales to new supply in Manchester indicates relatively tight housing market supply which points to continued upward pressure on house prices.
Many cities across the Midlands are registering above average growth, including Leicester (7.7%), Birmingham (7.7%) and Nottingham (7.2%).
The dynamics of the UK housing market continue to shift, with house price inflation in these cities surpassing the previously high growth cities such as Bristol and London.
By the end of 2017, Hometrack expects house price growth in London to slow further to between 2 and 3%. With the level of inflation increasing this means the capital is set to record a real terms drop in prices over 2017, the first time this has happened since 2011.
Richard Donnell, insight director at Hometrack, said: “Looking ahead we expect current trends to continue with house price growth losing momentum in cities across southern England. This is due to record high housing affordability and subsequently a large numbers of households being priced out of the market.”
“Outside southern England, we anticipate prices will continue to increase over 2017 as households take advantage of record low mortgage rates and an improving economic outlook.
“On paper there still remains material upside for prices in the Midlands, northern England and Scotland but much depends on how market sentiment is impacted by factors such as the general election, Brexit negotiations and rising inflation which will create a decline in real wage growth.”
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