The three-month growth rate in London increases as sellers become more realistic on pricing, according to the latest Hometrack UK Cities House Price Index.
The discounts from asking prices in London are narrowing and this is a positive for sales volumes.
Manchester is registering the highest annual growth rate at 7.4% and the lowest level of price discounting, followed by Liverpool at 7.2%, Birmingham at 6.8% and Leicester at 6.5%.
House prices are falling in real terms across six cities, with a growth below the 2.4% rate of consumer price inflation in Southampton, Oxford, Belfast, London, Cambridge and Aberdeen.
London’s annual growth rate is 0.7% higher, but there has been an increase in the three-month growth rate.
London house price growth is stabilising, reflecting greater realism on the part of sellers in the wake of a two-year re-pricing process. Since 2016 the discount from asking prices to sales prices has widened, reaching a high of 7% in inner London at the end of 2017.
Discounted asking prices
Over the first half of 2018, price cuts agreed to achieve a sale have started to narrow in inner London to 6.7%. Discounts have stabilised in outer London and the adjacent commuter areas. This is consistent with less downward pressure on prices.
Liverpool has the second fastest rate of growth as prices rise quickly off a low base. The level of discounting in the city has narrowed over the last two years but remains above average at 4.6%.
Manchester has the lowest level of discounting, at 2.2%, across all the cities in England and Wales. This remains on a downward trend and it is no surprise the city is currently registering the fastest growth in prices.
House price inflation in Birmingham has moderated over the last year and the gap between asking and achieved prices has started to plateau, standing at 2.8%.
Steve Seal, director of sales and marketing at Bluestone Mortgages, said: “With distinct regional differences, it’s challenging to find a ‘one-size-fits-all’ approach to tackling varying housing needs. Strategies aimed at building more affordable housing should be supported throughout the country, but in areas like London, and for first-time buyers, more help is required.
“Investment in government schemes have set the ball rolling, however for self-employed borrowers, contractors and entrepreneurs, this growing group of the UK workforce still struggles to make that first step. The specialist lending market remains vital in providing these consumers with a helping hand and is committed to securing their homeownership aspirations.”
Kevin Roberts, director at Legal and General Mortgage Club, said: “House prices rising at more sustainable rates and improving product choice in the mortgage market are improving the opportunities for first-time buyers to step on the housing ladder, but for many people it still remains a struggle.
“While the focus is often rightly on first-time buyers, we shouldn’t forget the plight of homemovers as well. Recent figures have shown the number of homemovers has fallen behind those of first-time buyers for the first time since 1995, as the cost of moving and high price of property convince many to stay put.
“No matter where we sit on the ladder, first-time buyers or down-sizers, we all need more choice. A boost to housing supply remains critical and it’s essential that the Government continues to focus on meeting the target of 300,000 new homes a year.”