House prices in key cities in the UK increased by 6.9% in the 12 months to January 2017, led by Bristol, Oxford and Manchester, the latest index data shows.
But the annual rate is down by 1% and London has seen growth fall to 6.4%, its lowest level for three and a half years, according to the figures from the Hometrack index.
Indeed, London is now in eighth place in the city price ranking. With a rise of 9.5% year on year to an average of £263,200 Bristol is top, followed by Oxford, up 9.2% to £430,200 and Manchester up 8.3% to £150,600.
The only city out of the 20 ranked to continue to see an annual price drop is Aberdeen where prices are down 3.7% to £186,200 but month on month they are up by 2.8%, one of the strongest monthly gains in the index.
Month on month Liverpool saw prices rise by 2.9%, Leicester by 2.5%, Bournemouth by 2.3% and Manchester by 2%. But Edinburgh prices were down 1.3% month on month, Belfast own by 0.2% and Sheffield down by 0.1%.
The index report says that the slight drop in annual price growth overall is due to weaker investor demand after stamp duty changes last year and the impact of the vote to leave the European Union in June.
London is being overtaken by large regional cities such as Birmingham, Manchester and Liverpool where prices are rising off a lower base and where affordability levels remain in line with their long run average, it also suggests. Manchester is the fastest growing city outside southern England where prices are up 8.3% in the last year on an average price which is a third that of London.
The report also says that slower growth in London is not surprising given house prices are 85% higher than they were in 2009 and this growth is primarily a result of rising incomes and strong demand with buying power fuelled by record low mortgage rates.
‘In our view there is material upside for house prices in the coming years in many cities where the recovery since 2009 has been limited. This is based on our analysis of previous housing cycles and the recent profile of the recovery in London,’ the report says.
‘The beneficiaries will be cities where investment in employment, infrastructure and regeneration will help stimulate the local economy. The timing and scale of future house price growth will, of course, depend upon the outlook for jobs, incomes and mortgage rates,’ it concludes.