House Prices Growth Slows Considerably in Southern Locations in UK
The annual rate of price growth in key UK cities has slowed but 11 still have prices rising as a faster rate than 12 months ago, the latest data shows.
Overall prices in 20 key cities have increased by 5.3% in the 12 months to April, 2017, but this is down from 8.7% in April 2016, according to the index from Hometrack.
The growth is led by Manchester with annual growth of 8.4%, followed by Leicester and Birmingham, both up by 7.7%. Annual growth is still down in Aberdeen, some 3.8% below a year ago and 0.6% down in Oxford.
In London, annual growth of 3.5% is down considerably from the 13% recorded in April 2016 and it is now at its lowest level for five years.
In the three months to April 2017 average prices have increased by 3.2% with above average growth recorded in large cities such as Manchester with quarterly growth of 4%, Birmingham up 3.8% and Edinburgh up 3.7%.
Bristol has also seen a slowdown in price growth. It was 12.9% in April 2016 but has now fallen to 5.9%. It seems that house price inflation is falling in southern cities but still robust in the Midlands and the North.
According to the Hometrack index report the steep deceleration in growth in Southern cities such as London, Bristol and Oxford is due to weaker levels of demand from home owners and investors in the face of affordability constraints, tax changes and weaker market sentiment.
‘Looking ahead we expect current trends to continue with house price growth losing momentum in cities across southern England where housing unaffordability is at a record high and has priced large numbers of households out of the market. Weaker investor demand supports this trend, taking demand out of the market and adding to supply as investors look to rationalise and de-leverage portfolios in the wake of tax changes,’ the report says.
The report predicts that house price growth in London will slow towards 2% to 3% by the end of 2017. ‘With the underlying level of consumer price inflation increasing this means London is set to record a real terms drop in prices over 2017, the first time this has happened since 2011,’ it points out.
Outside Southern England Hometrack expect prices to continue to increase over 2017 as households take advantage of low mortgage rates and an improving economic outlook. ‘On paper, there is material upside for prices outside southern England but much depends on how market sentiment is impacted by the general election, rising inflation and a growing focus on the Brexit negotiations later in 2017 and into 2018,’ it explains.
‘One more certain aspect of the market is the availability of homes for sale which we expect to remain constrained. In our view this will tend to keep the upward pressure on house prices in those markets where affordability remains attractive,’ it adds.
