The pace of house price growth in key cities in the UK is slowing with the latest index figures showing an annual rise of 8.2% in August and the fall off being led by those in the south.
The 20 city index from Hometrack also recorded its lowest level of quarterly growth at 1.9% due to what the firm described as seasonal lull in market activity and weaker demand after the European Union referendum and stamp duty changes.
Bristol continued to register the fastest rate of annual growth at 13.1%, followed by London at 10.4% but the index report says that trend in these cities is towards slower growth. Indeed, it add that price growth in London is on course to end the year at just 6%.
A similar trend is evident across most cities located in southern England including Cambridge, Oxford and Bournemouth where annual growth has slowed in the last few months. Cambridge has registered the fastest deceleration in growth from an annual rate of 16% in March 2016 to just 6% today as affordability pressures and weaker investor demand impact growth.
London has registered a modest 0.9% increase in house prices over the last three months, more than half the average quarterly growth rate over the last 12 months of 1.9% and Hometrack says that if this trend continues, as seems highly likely, then house price growth in the capital will be running at 6% per annum by the end of 2016 on course for low single digit growth by spring 2017.
Record unaffordability, tax changes that impact investor demand and high stamp duty costs are all combining to reduce market activity in the face of rising supply, it adds, and inner London has the lowest growth.
Indeed the lowest rates of annual growth is in the highest value, inner London boroughs with Kensington and Chelsea at 0.2%, Hammersmith and Fulham 1%, Westminster 1.8%, Wandsworth 4.1% and Camden 4.4%.
Hometrack say that most of these areas have been registering small price falls over recent months and further single digit falls are likely in the months ahead as pricing levels re-align to what buyers are prepared to pay.
The highest rates of house price growth remain in the outer London boroughs of Barking and Dagenham at 16.2% and Havering at 14.6% where average house prices are 30% lower than the London average. However, the report explains that affordability is running out fast in these markets which have significantly outperformed central London for the last two years and single digit growth awaits in the months ahead.
While house prices in London and other southern cities have been rising consistently for approaching eight years, supported by strong investor demand and low mortgage rates, there are several cities where the recovery has been more short lived, the report explains.
The city housing markets with the strongest underlying rates of growth remain those that have some of the lowest prices and where the pick up in prices has been running for the shortest period of time. Liverpool and Glasgow have recorded the fastest growth in the last three months where average house prices of £114,000 are around half the price of the 20 city average of £239,400.
Other regional cities such as Birmingham, Edinburgh and Aberdeen have posted house price increases of more than 2% in the last quarter, all above the 20 city average over the same period of 1.9%.
This something of a turnaround for Aberdeen where average prices fell by £20,000 or 10% since July 2015 but where they have rebounded in the last quarter now the impact of the falling oil prices has been priced into capital values.
