London will no longer lead the growth in house prices in major UK cities as it is overtaken by rapid increases in regional hubs, according to the property research firm Hometrack. Its prices are predicted to grow by just 2% in 2017, significantly slower than in the previous year.
The slowdown will also be felt in other southern cities – Oxford, Cambridge, Bournemouth and Bristol – as house price growth spreads to the Midlands and North. Birmingham, Manchester, Leeds, Leicester and Nottingham will be among the biggest risers in 2017.
Hometrack predicts house prices to rise by an average of 4% across the top 20 cities during the coming year. "In London and southern cities homeowners are facing the greatest affordability pressures, while the buoyant investor market has been impacted by fiscal changes, as well as tougher underwriting standards for mortgage borrowers," said Richard Donnell, insight director at Hometrack.
"In larger regional UK cities, such as Birmingham and Manchester, affordability remains attractive and we believe there is room for further price growth over 2017. With this in mind, we predict that city level house price growth in 2017 will run slightly higher than the current consensus of 2-3%, however, this will largely be driven by the scale of the slowdown in London."
The firm said home sales have risen by between 50-60% in all cities over the past five years, buoyed by low interest rates and support for first-time buyers. But the cocktail of affordability issues, tax hikes for investors, and Brexit uncertainty will see sales fall by over 5% in London, Bristol, and Cambridge.
"In contrast, the cities registering sustained growth in house prices are expected to record higher turnover over 2016," said the report. "The greatest increase in turnover over 2016 is expected in Birmingham, Leeds, Leicester and Nottingham."
The latest Hometrack UK Cities Index said the average house price of the UK's 20 biggest cities rose 7.7% over the year to November 2016, reaching £243,200. Bristol recorded the fastest growth at 9.9% to an average price of £259,700. Aberdeen, the worst performer, saw its average price drop 6.5% to £183,000. London's average house price rose 7.6% to £483,300.
|City||Average price Nov-16||% yoy November 2016|
|20 city index||£243,200||7.70%|
Source: Hometrack UK Cities Index, November 2016