After the annual rate of price growth in London hit a five-year low last month, the slowdown has "bottomed out", according to a new index released today.
The latest Hometrack UK Cities House Price Index revealed that annual growth rate rose to 2.8 per cent, up from 2.3 per cent last month.
The reason for this price growth is predominantly due to both lower transaction volumes, as well as a lack of forced sellers. In the past two years, housing turnover has fallen by 17 per cent due to policy changes and affordability pressures.
The result of this is a low rate of house price growth, which Hometrack predicts will continue throughout 2017, if not longer.
Richard Donnell, research and insight director at Hometrack, said that the Brexit vote was also a factor in changing house prices.
The London housing market has registered a rapid deceleration in house price growth since 2016 as affordability pressures impact demand and the Brexit vote adversely affected housing sentiment.
Pinpointing the data further, he continued: “The downward pressure on prices is greatest in the most expensive parts of the capital where demand has been weaker since the end of 2014.”
Beyond the capital, the annual growth price across the UK cities monitored by Hometrack stands at 5.3 per cent, down from 7.4 per cent in July last year. Growth has rallied in recent months and continues to remain healthy in regional cities. Birmingham, Manchester and Nottingham were the fastest-growing cities this month, up eight per cent, 7.1 per cent and 6.9 per cent respectively.
Donnell continued: “There remains a clear divide between the prospects for house price growth in regional cities, where affordability levels are attractive, and the prospects for house price growth in London and other high value cities in Southern England.”
It is likely that, in regional cities, house price growth will be sustained, whereas London looks set for a continued stretch of lower house price growth.