Year-on-year house price falls in London are thought to be unlikely amid signs the rapid slowdown in growth could be coming to an end.
Hometrack’s latest UK Cities House Price index showed house price inflation in the capital is running at 3.3 per cent year-on-year - the lowest level for five years and down from 14 per cent a year ago.
But lower turnover and restricted supply mean growth for 2017 is expected to plateau at between 2 and 3 per cent, according to Richard Donnell, research and insight director at Hometrack.
Mr Donnell said: “We don’t expect year-on-year falls in our London index in 2017, but there are small price falls in localised markets, typically those with average prices of between £600,000 and £800,000.”
Manchester and Birmingham were dubbed the engines of UK house price growth as both cities continued to see solid gains.
Annual house price inflation in Birmingham stood at 7.7 per cent year-on-year, while Manchester witnessed growth of 6.8 per cent – a figure that was matched by Leicester and Nottingham.
Edinburgh (5.5 per cent), Southampton (5.1 per cent) and Bristol (5 per cent) also performed strongly.
Despite the snap general election, average prices increased by 3.5 per cent during the past three months – the highest quarterly rate of growth for four years.
Annual growth in May was 5.1 per cent a year, down from 8.8 per cent in May 2016.
Over the remainder of 2017, Hometrack expects further house price growth in most major regional cities outside of London and the south east, including Birmingham and Manchester.
Mr Donnell added: “House prices in London have grown 90 per cent since 2009, but growth in 10 cities has been below 30 per cent over the same period.
“So long as the economy continues to grow, and mortgage rates remain low, we expect house prices to keep rising at a steady rate and close the gap with London.”
Liz Syms, chief executive at London-based Connect Mortgages, said: “With the weakening of the pound, we are getting that interest still from overseas, which helps keep the prices stable - as well as the shortage of houses.
“We deal with a lot of ex-pats and overseas purchasers, and we have seen a continued interest from that market.”
simon.allin@ft.com
