Compared to 2009, house prices in the capital are up 85%, but in January growth fell to 6.4%, the lowest level since June 2013. Hometrack expects this figure to hit 0% by the end of the year. This is driven largely by inner-London house prices falling modestly year on year due to weaker demand.
The headline rate of growth for the index is now running at 6.9%, compared to 7.9% in January 2016.
In contrast to London, the housing recovery in large regional cities such as Newcastle, Glasgow and Liverpool (pictured) has been more protracted. House prices are only up between 13% and 16% since the downturn.
Bristol remains the fastest growing city in the index with annual growth holding steady at 9.5%, although down from a recent high of 14% in June 2016. Outside of southern England, Manchester has seen the greatest uplift, with an increase of 8.3% in the last year.
Birmingham and Liverpool have also overtaken London, where prices are rising off a lower base and affordability levels remain attractive.
Richard Donnell, insight director at Hometrack, said: “Growth in London has been superseded by large regional cities such as Manchester, Liverpool and Birmingham. When you consider that house prices in London are 85% higher than they were in 2009 it is not surprising that the pace of increases is slowing toward a standstill as very high house price increases mean affordability is stretched.
He added that there is a stark contrast with large regional cities outside of London and the South East.
“They continue to register robust levels of house price inflation in excess of 7%. The question is how much further house prices in regional cities could have to run were house prices to fully ‘price in’ low mortgage rates supported by rising incomes and employment.”
Donnell said Hometrack believes areas that have experienced limited recovery since 2009 could experience “material upside” in the coming years, as long as there is a positive outlook for jobs, incomes and mortgage rates.
