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London house price growth set to slow, says Hometrack

Annual house price growth remained broadly unchanged in June across the UK’s major towns and cities, but signs are that price growth will fall in London in the coming months as the EU referendum impacts on the property market, a new report has predicted.

The latest Hometrack UK Cities House Price Index saw annual growth stall at 10.2%, but the rate of increase is likely to slow down towards the low single digits across the UK's major towns and cities, as the market in places like London starts to slow, owed largely to rising supply and relatively fewer sales pointing to slower house price growth in the months ahead.

Bristol remains the fastest growing city in the UK with a year-on-year growth rate of 14.7%, but annual house price inflation in other cities in the south of England, such as Cambridge, Southampton, Bournemouth and as mentioned above, London, started to slow between May and June 2016. 

But overall, looking at the three months to mid-July the analysis shows that recent sales momentum in regional cities, and higher house price growth, appears to have held up over the referendum period, despite the slowdown in some of the major southern cities. 

Year on year growth by city over the last 12 months

London house price growth set to slow, says Hometrack

Source: Hometrack UK Cities House Price Index

As the data in graph below reveals, the relative change in new listings and sales for selected cities – it reveals that new listings have grown faster in the last three months than the average increase in supply seen over the last 12 months. For all cities in England and Wales, excluding London, new listings have grown 10% faster than the 12 month average, this rises to over 15% in London.

Relative change in new listings and sales over 3 months to last 12 months

London house price growth set to slow, says Hometrack

Source: Hometrack analysis of property listings data

Richard Donnell, insight director at Hometrack, said: “The headwinds that were facing the London market in the lead up to the EU referendum have intensified on the back of the vote to leave and are resulting in slower sales rates. It is still early days, and seasonal factors also need to be considered but the growth in new listings and slower sales points to slower price growth in the months ahead. This growth in supply reflects a mix of new homes filtering through from London’s expanded development pipeline, investors looking to take capital gains, or selling to de-leverage their investments following the reduction in tax relief on mortgage payments for buy-to let investors.

“In contrast, in many large regional cities, sales appear to have held up thanks to a combination of much better housing affordability, improving economic growth and record low mortgage rates helping to stimulate demand.”

Donnell concluded: “The reality is that it is still very early days to assess the true impact of the Brexit vote on the housing market. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year. The severity of a slowdown will depend upon the response of consumers and businesses to the uncertainty created by the decision to leave the EU and the impact this has on the economy. The early market activity data confirms our view that London will bear the brunt of any slowdown.”

Cities Index summary table – June 2016

City

Average price

% yoy

June 2015

% yoy

June 2016

Bristol

£253,400

7.8%

14.7%

London

£476,800

8.2%

13.7%

Cambridge

£411,800

9.5%

11.5%

Southampton

£214,600

6.5%

9.7%

Portsmouth

£215,700

6.5%

9.3%

Manchester

£147,400

4.3%

9.0%

Oxford

£407,800

9.6%

8.7%

Birmingham

£143,300

4.0%

8.3%

Bournemouth

£265,000

5.5%

8.0%

Nottingham

£137,800

4.6%

7.8%

Leeds

£151,800

4.1%

7.6%

Leicester

£151,800

4.4%

7.5%

Cardiff

£188,700

4.4%

6.8%

Liverpool

£112,200

1.3%

6.1%

Sheffield

£128,800

3.4%

4.3%

Glasgow

£113,400

5.2%

3.7%

Newcastle

£126,400

1.8%

3.6%

Edinburgh

£203,500

6.3%

3.2%

Belfast

£122,700

6.9%

2.6%

Aberdeen

£179,900

0.3%

-8.2%

20 city index

£240,500

6.9%

10.2%

UK

£202,000

5.0%

8.6%

Source: Hometrack

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