The rapid growth of house prices weakened in May, with London the second slowest region in the UK, new official data published today showed.
Average house prices increased by 4.7 per cent in the year to May, down from 5.3 per cent in the previous month, according to the Office for National Statistics (ONS).
Prices in the capital rose by three per cent, with the North East the only region where prices increased at a slower rate, by 1.6 per cent.
The lag in London prices comes after price rises averaged over 10 per cent over the course of 2016.
The fastest-growing region was the East of England, where prices boomed by 7.5 per cent in the year to May.
House price growth has stalled since June last year, before the Brexit referendum, when the annual rate of change hit 8.2 per cent.
The outlook for further price rises is clouded by falling real wages and consequent falling consumer confidence, while the uncertainty over Brexit continues to hang over the economy.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “House prices likely will only edge up in the second half of the year. Lenders are reporting that they will lend less in the third quarter and the recent pickup in wholesale funding costs suggests that they will not continue to cut mortgage rates.”
The average British house price was £221,000 in May 2017. This is £10,000 higher than in May 2016 and £1,000 higher than April.
London still has by far the highest average house price, at £481,000, making it far less affordable than even the next most expensive region, the South East of England, at £316,000. At a local level, in which the data are generally more volatile, Kensington and Chelsea was still the second fastest-growing local authority, where house prices rose by 17.1 per cent in the year to May to hit £1.5m.
However, the broader slowdown in prices in the capital may help sustain demand in volume terms, according to Lucy Pendleton, director of estate agents James Pendleton.
Pendleton said: "Prices are coming down to more realistic levels of their own accord and in many areas, particularly the capital, this will have a restorative effect on the market longer term.”