House price growth in key British cities has fallen from 7.4% in July 2016 to 5.3% but some locations continue to see above average prices rises, the latest index shows.
The biggest annual growth was in Birmingham with a rise of 8%, followed by Manchester up 7.1%, Nottingham up 6.0% and Southampton up 6.5%, according to the data from Hometrack.
In Aberdeen the market has not recovered from a downturn due to falling oil prices and the city has seen negative growth for two years. Prices are 16% lower than they were in 2014 while year on year they are down 3% and month on month down 0.3%.
On a monthly basis the only other city to see prices fall was Oxford with a decline of 0.1% and the steep slowdown in London house price inflation has bottomed out with an increase in the annual rate of growth to 2.8% and month on month growth of 0.9%.
Month on month growth was led by Birmingham, Manchester and Nottingham, all up by 1.9%, followed by Leeds and Edinburgh up 1.7%, Southampton up 1.4% and Newcastle and Portsmouth up 1.3%.
The index report says that the stabilisation in London is due to lower sales volumes and an absence of forced sellers. Housing turnover across London has fallen by 17% since 2015 as affordability pressures and recent policy changes impact demand. In the absence of a jump in borrowing costs, or other adverse economic factors, sellers are slow to accept downward adjustments in prices in the face of weaker, price sensitive demand, the report points out.
It also shows that pressure on prices is greatest in the most expensive parts of London where demand has been weaker since the end of 2014. These inner London markets are registering small year on year price falls of up to 2%. The downward pricing pressure is less evident in the lowest value markets of London which have registered above average growth and price inflation of over 3%.
Looking ahead, the report says that there remains a clear divide between the prospects for house price growth in regional cities, where affordability levels are attractive, and the prospects for house price growth in London and other high value cities in southern England.
‘We expect house price growth in regional cities to be sustained at current levels for the rest of 2017. London is set for a sustained period of low nominal house price growth and lower sales volumes,’ it adds.
Russell Quirk, chief executive officer of eMoov believes that prices will start rising again in London. ‘The end of an 18 month slowdown in London property values is a sure sign that the market is once again finding its feet. It’s likely that we will now see property price growth begin to return to previous levels over the coming months as the holidays end and it’s back to business for all,’ he said.
Opportunities for young professional people is helping the northern cities to see the strongest growth, according to Graham Davidson, managing director of buy to let specialist Sequre Property Investment and he said that Leeds and Manchester are seeing some of the strongest levels of tenant demand at present.
‘London is still one of the worst performers for UK growth as investors and residents alike are wising up to the fact they can get more for their money by venturing outside the capital. With a decent annual growth of 5.3% across the UK too, it’s clear that the market has remained resilient despite some market uncertainty and the only place that continues to bear the brunt of it is London, no doubt a result of previous sky rocketing prices and unrealistic rental expectations,’ he added.