House prices across London are now falling in real terms due to fears over Brexit’s impact on employment, according to Hometrack.
The latest Hometrack UK Cities House Price Index reveals the capital’s annual rate of growth was 2.3 per cent in September, making it one of the worst-performing urban areas.
With the general rate of consumer price index (CPI) inflation running at 3 per cent, prices fell in real terms in 85 per cent of the areas covered by the London City index.
The trend was mirrored across a range of southern cities, with Cambridge (2.3 per cent), Oxford (2.3 per cent) and Cardiff (2.4 per cent) recording growth below the CPI measure of inflation.
Richard Donnell, research and insight director at Hometrack, said: “The London housing market is now firmly stuck in neutral. Stretched affordability, low yields for investors and concerns over Brexit and its impact on employment are weighing on market sentiment.
“As a result, further house price falls in real terms across London are inevitable as prices re-align to what buyers are willing to spend.
“Consequently, nominal house price inflation in London looks set to remain between 1 per cent to 3 per cent over the next six to twelve months.”
In contrast, growth in Scotland picked up as Edinburgh leapfrogged Manchester to take top spot in September with year-on-year growth of 6.7 per cent.
Glasgow has also registered a significant uptick in house price growth from 1.8 per cent a year ago to 5.6 per cent in September 2017.
And although Aberdeen house prices have been falling for the last two-and-a-half years, September’s year-on-year growth rate of -1.8 per cent was the slowest rate of decline for two years.
Outside of Scotland, Manchester (6.5 per cent), Birmingham (5.9 per cent) and Bournemouth (5.4 per cent) posted solid growth figures.
Mr Donnell added: “House prices look likely to continue rising in regional cities as affordability remains attractive and values are growing off a low base.
“The rate of growth is expected to moderate around its current level and will be tempered by economic and sentiment factors such as the squeeze on incomes from rising inflation and concerns over the economic outlook.
“Talk of a possible increase in interest rates and any knock-on effect for mortgages is also likely to further temper demand.”
Matthew Harris, director at Edinburgh-based Harris Independent Financial Advice, commented: “There are still areas of Edinburgh where really attractive property looks much cheaper than the south east, and the same is true of some areas of northern England.
“Despite concerns over inflation, the economy has fundamentally been reasonably healthy, and interest rates are still very low. There is still plenty of ability to borrow large sums of money.
“I am not sure how long that growth will continue. We are seeing properties sit on the market for quite a while, and some are being pulled from the market, and you do see price cuts. The market more recently has started to cool a bit, but it is not showing up year-on-year.
“But still there are very attractive cities and towns to buy in, and you don’t have the problem in London of the Russian money or Chinese money not being there for some reason, or concerns over Brexit meaning European money is no longer there.”
City level summary, September 2017
| City | Current price | %yoy Sep-17 | %yoy Sep-16 |
| Edinburgh | £219,500 | 6.70% | 3.80% |
| Manchester | £156,800 | 6.50% | 6.60% |
| Birmingham | £153,200 | 5.90% | 6.60% |
| Bournemouth | £285,100 | 5.40% | 6.40% |
| Leicester | £163,300 | 5.40% | 5.50% |
| Glasgow | £120,300 | 5.30% | 1.80% |
| Bristol | £276,900 | 5.10% | 11.80% |
| Portsmouth | £230,300 | 5.10% | 8.10% |
| Nottingham | £144,200 | 5.00% | 5.50% |
| Southampton | £222,600 | 4.40% | 7.40% |
| Leeds | £161,100 | 4.30% | 4.90% |
| Sheffield | £135,100 | 4.20% | 3.70% |
| Liverpool | £114,800 | 3.20% | 2.20% |
| Belfast | £129,100 | 3.10% | 2.90% |
| Newcastle | £125,900 | 3.00% | 1.50% |
| Cardiff | £198,000 | 2.40% | 6.40% |
| London | £493,800 | 2.30% | 8.90% |
| Oxford | £427,100 | 2.30% | 7.80% |
| Cambridge | £433,600 | 1.70% | 5.10% |
| Aberdeen | £173,900 | -1.80% | -10.60% |
| 20 city index | £251,600 | 4.90% | 6.00% |
| UK | £211,200 | 3.60% | 6.00% |
simon.allin@ft.com
