London house prices are stuck in neutral according to the latest figures from property consultancy Hometrack, which says values in the capital have risen just 0.5 per cent in the past three months.
With the Consumer Price Index measure of inflation running at 3.0 per cent, Hometrack says 85 per cent of the areas covered by its London calculations are now falling in real terms.
House price growth across many southern cities also remains flat. In Cambridge (2.3 per cent), Oxford (2.3 per cent) and Cardiff (2.4 per cent) the annual rate of growth is below the general rate of inflation.
In contrast, the Hometrack index reveals that cities in Scotland have seen an acceleration in house price growth. Housing sales north of the border over the last quarter have increased by 20 per cent when compared to the previous 12 months.
While London sits towards the foot of the 20-city Hometrack league table, Scotland’s capital Edinburgh now tops the list of UK cities ranked by price growth at 6.7 per cent annually. Manchester has dropped to second place with annual growth of 6.5 per cent followed by Birmingham at 5.9 per cent.
Glasgow has also registered a significant uptick in house price growth, rising from 1.8 per cent a year ago to 5.6 per cent today. Meanwhile, in Aberdeen house prices have been falling for the last two years but the year on year fall of 1.8 per cent is the slowest rate of price since 2015.
Overall the headline rate of annual growth across UK cities is running at 4.9 per cent compared to 6.0 per cent 12 months ago.
“The London housing market is now firmly stuck in neutral. Stretched affordability, low yields for investors and concerns over Brexit and its impact on employment are weighing on market sentiment. As a result, further house price falls in real terms across London are inevitable as prices re-align to what buyers are willing to spend” explains Richard Donnell, research and insight director at Hometrack.
“However, house prices look likely to continue rising in regional cities as affordability remains attractive and values are growing off a low base. The rate of growth is expected to moderate around its current level and will be tempered by economic and sentiment factors such as the squeeze on incomes from rising inflation and concerns over the economic outlook. Talk of a possible increase in interest rates and any knock-on effect for mortgages, is also likely to further temper demand” he says.