House price inflation in cities has fallen by 1.2% since 2016, and now stands at 6.4%, according to a new house price index.
Thereveals that house price growth in the south of England’s high value cities has been impacted by increased affordability pressures. Difficult supply and demand dynamics in regional cities, meanwhile, mean that growth outside of the south is being suppressed, preventing it from reaching double digit rates.
London, which has now fallen to 10th place in the list of fastest growing cities, is dragging headline growth down. Its annual rate of increase was recorded as just 5.6% by Hometrack, the lowest level of growth seen in the capital since 2013. To put this in context, the rate of growth in Manchester was 8.8% - the highest rate of growth seen for the city yet.
Hometrack UK has said that the decline in house prices that is being witnessed in the UK’s least affordable cities, such as London, Oxford, Cambridge and Bristol, is due to a combination of factors. It notes weaker investment demand, the impact of the Brexit vote on buyer confidence and affordability pressures. Overall sales volumes in London are currently 7.5% lower than in 2015, when sales levels in these cities were at their peak.
In contrast, the index shows that cities such as Manchester, Liverpool, Leicester and Birmingham have seen surges in transactions volumes of between 30% to 40% over the past three years, due to low mortgage rates and buoyant labour markets. Although growth over 2016 was recorded at a slower rate of less than 10%.
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 2-3 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.”
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