House price growth in UK’s major cities continues to slow

The annual rate of residential property price growth across 20 of the largest UK cities slowed to 8.2% in August, from 9.5% in July, taking the 20 city average to £239,400, according to the latest Hometrack UK Cities Index.  

The marked slowdown is being fuelled primarily by weaker price growth in the big cities across the south of England – led by London.

In the three months to August home prices across the 20 big cities rose by just 1.9% - the lowest level of quarterly growth since February.

Despite the slowdown, Bristol continues to register the fastest rate of annual growth at an average of 13.1%, followed by London at 10.4% but growth in both cities is cooling, with the capital on course to end 2016 up 6% year-on-year owed mainly to a slowdown in the highest value inner London borough, including Kensington & Chelsea (0.2%), Hammersmith and Fulham (1%), Westminster (1.8%), Wandsworth (4.1%) and Camden (4.4%).

Richard Donnell, insight director at Hometrack, said: “On current trends house price growth in London will be running at circa. 6% per annum by December and on course for low single digit growth by spring 2017. Record unaffordability, tax changes impacting investor demand and high stamp duty costs are all combining to reduce market activity in the face of rising supply.

“Despite the overall slowdown in London, it is dangerous to view the capital as a single housing market. While many of the central boroughs have seen low rates of growth, in parts of outer London where house prices are 30% lower than the London average, such as Barking and Dagenham and Havering, prices are rising by more than 15% although these areas are starting to slow."

A similar trend is evident in most cities located in southern England, including Cambridge, Oxford and Bournemouth where annual growth has eased in recent 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.

Cities with short-lived housing market recoveries, like Liverpool and Glasgow, registered the fastest rate of growth, and yet they continue to offer some of the cheapest priced properties in the country.

Donnell continued: “Regional cities such as Glasgow, Liverpool, Birmingham and Edinburgh have all posted above average growth in the last three months as low mortgage rates and affordable property prices support growth. Aberdeen has registered a small bounce back in house prices - after house prices registered a £20,000 fall since July 2015 – the rebound in growth reflects the fact that the recent fall in the oil price has now been priced into capital values.”