London's house price growth has slowed to a three year low as Manchester recorded the highest house price inflation of any major UK city, as yields of 10 percent attracted investors who have been priced out of the South East.
The latest Hometrack UK Cities House Price Index shows Manchester recorded house price inflation of 8.9 percent in 2016 against a national average of 7.2 percent.
By contrast, London recorded growth of 7.3 percent, its lowest annual rate for more than 3 years.
Other cities with higher inflation than London include Bristol (9.6 percent), Oxford (8.1 percent), Portsmouth (8 percent), Southampton (7.9 percent) and Birmingham (7.5 percent).
Kusal Ariyawansa, chartered financial planner at Appleton Gerrard, a Manchester based IFA firm, said that investors could get yields of over 10 percent from properties near one of the three universities based in Manchester.
"Salford is saturated with investors," he said. "A lot of investors from outside Manchester have piled in, bought properties around the universities, renovated them to a high standard and are enjoying very high yields. You can get a yield 2-3 times that of a property in the South."
Richard Donnell, insight director at Hometrack said that: “This latest UK city house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years."
He attributed the relative slowness of house price inflation in London to prices reaching a multiple of 14.2 times earnings, a record high level of housing unaffordability.
The other side of the house price boom was given by Stephen Smith, director at Legal & General Housing Partnerships.
“Manchester has replaced London as the UK city where house prices are rising at the fastest rate – a dubious accolade at best! Great news for homeowners in the city, perhaps - but not much help to those Mancunians trying to move up the ladder or to buy a starter home for their family," he said.
Smith said the structural flaws in the housing market needed addressing and that a proposed Housing White Paper due later this month was the perfect opportunity for the Government to build on its promises of providing millions more affordable homes”