House Price Growth Slows, as the North Outpaces London

The last three months have seen house price growth slow down, as the north of England outpaces London and the south, according to the latest Hometrack UK Cities House Price Index.

House Price Growth Slows, as the North Outpaces London

The annual rate of house price growth across the 20 cities included in the study slowed to 9.5% in July, after 12 months of higher inflation. This shift in momentum was due to growth stalling across a number of cities in southern England over the past quarter, says Hometrack.

In the three months to July, house prices in London rose by just 2.1% – the lowest quarterly rate of growth since February 2015. Additionally, growth in Bristol, which was the fastest growing city over the last year, slowed to 2.6% from a recent high of 5% in May. Prices in Cambridge dropped by 1% in the last quarter, although prices are 7.1% higher than 12 months ago.

However, Hometrack has also found that house price growth in many large regional cities in the north of England and Scotland shows no signs of slowing down. The rate of annual house price inflation in Leeds, Manchester, Birmingham, Liverpool and Nottingham continues to stand between 7-8%.

Focusing on activity over the past quarter, Hometrack revealed that the highest rates of growth were recorded in lower value, high yielding cities, such as Glasgow (5.2%), Liverpool (4.4%), Manchester and Nottingham (3.4%).

In Aberdeen, the annual rate of house price growth fell at a slower rate of 8% in July, as prices rose by 2% in the last quarter, a sign that the housing market may have adjusted to the impact of falling oil prices on demand over the past year.

The Insight Director at Hometrack, Richard Donnell, comments: “In the absence of adverse economic trends impacting employment and mortgage rates, the near term outlook is for a continued slowdown in London towards mid-single digit growth. The slowdown in London is being seen across the market, but is not accounted for by seasonal factors, with weaker demand from homeowners and investors as supply grows. This analysis suggests London house price growth will continue to slow over the rest of the year.

“In contrast, northern regional cities will continue to register stable growth rates, as households benefit from record low mortgage rates and affordability remains attractive.”

Donnell adds: “We continue to believe that turnover will register the brunt of the slowdown in London. In the face of lower sales volumes, agents will look to re-price stock in line with what buyers are prepared, and can afford, to pay. Past experience shows that this process can run for as long as six months, and relies, in part, in how quickly sellers are willing to adjust to what buyers are prepared to pay.”