London leads a ‘marked slowdown’ in UK cities’ house price inflation

Regional cities in the North of England and Scotland are set to outpace London and former "engines of growth" in the South

Annual property price inflation across the UK’s cities is running at +9.5%, according to the latest survey by Hometrack, but the pace seems to be slowing up after 12 months of acceleration – and prime southern hubs are leading the downward charge.

Regional cities in the North of England and Scotland are set to outpace London and former “engines of growth” in the South. The three months to July saw London lead the deceleration trend, posting price growth of just 2.1%; that the lowest quarterly change for 17 months, since February 2015.

  • Annual and monthly house price growth in London City


Other prime urban locations have also stalled; Bristol – the fastest-growing city over the last 12 months – saw house price inflation drop to +2.6% in Q2, from a recent peak of +5% in May 2016. Cambridge, another formerly gilded location, recorded a 1% drop in property values in Q2, although prices are still 7.1% up on last year’s level.

Large regional cities outside southern England, on the other hand, continue to hold steady with growth at 7-8% per annum and “no sign of an imminent slowdown”.

The rate of annual house price growth in Leeds, Manchester, Birmingham, Liverpool and Nottingham continues to rise by between 7% and 8%. Focusing on activity in the last quarter, the highest rates of growth have been registered in lower value, high yielding cities where prices are rising of a lower base – Glasgow (5.2%), Liverpool (4.4%), Manchester and Nottingham (3.4%).

In Aberdeen the year-on-year rate of growth fell at a slower rate of -8% in July with prices up 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 last 12 months.

  • Summary results – July 2016
City Average price % yoy  July 2016 % last quarter to July 2016
Glasgow £115,200 5.3% 5.2%
Oxford £416,000 10.1% 4.7%
Liverpool £113,400 7.7% 4.4%
Nottingham £137,900 7.4% 3.4%
Manchester £147,700 8.4% 3.4%
Edinburgh £203,600 2.7% 3.1%
Leicester £152,700 7.4% 3.0%
Newcastle £127,400 4.2% 2.8%
Sheffield £129,600 4.1% 2.8%
Bristol £254,500 14.0% 2.6%
Portsmouth £216,200 8.9% 2.2%
Birmingham £143,300 7.6% 2.1%
London £476,600 11.7% 2.1%
Aberdeen £184,600 -8.0% 2.1%
Leeds £151,500 7.3% 2.1%
Cardiff £189,200 7.1% 1.7%
Southampton £213,300 8.3% 1.7%
Bournemouth £262,600 6.6% 0.6%
Belfast £122,700 2.8% 0.1%
Cambridge £404,500 7.1% -1.0%
20 city index £240,000 9.5% 3.2%
UK £202,400 8.1% 2.6%

Richard Donnell, Insight Director at Hometrack: “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 is not accounted for by seasonal factors with weaker demand from home owners 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 mortgages rates and affordability remains attractive.”

“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.”