The rate of house price growth in key cities in the UK is starting to plateau after a strong first half of the year with London in particular likely to see slower growth ahead, according to the latest index data.
Month on month the Hometrack Cities Index recorded growth of 6.9% in June and year on year growth is running at 10.2%, the same level as the previous month.
The index report suggests that double digit year on year growth has been sustained by the surge of investor demand ahead of the stamp duty change in April while low mortgage rates and improving economic conditions have continued to attract households into the market against a backdrop of dwindling supply with the net result being continued upward pressure on prices.
In June Bristol remained the fastest growing city with year on year price growth of 14.7% taking the average price to £253,400, followed by London with annual growth of 13.7% to £476,800 and then Cambridge up 11.5% to £411,800.
The data also shows a strong uplift in price growth in large cities such as Glasgow, Manchester, Liverpool and Leeds where house prices are comparatively affordable and yields above average and attractive to investors.
Month on month the highest growth was in Oxford at 9.6%, followed by Cambridge at 9.5%, London at 8.2% and Bristol at 7.8%. At the opposite Aberdeen has seen prices fall by 8.2% year on year but the city recorded a small uplift month on month of 0.3%.
The report points out that any impact from the decision by the UK to leave the European Union will not be reflected in the index for two to three months.
‘That said, we have reported signs of slowing growth in some cities, particularly in southern England where affordability levels are close to record highs. The slowdown might have been more apparent by now had the stamp duty change not been introduced,’ it says.
A new analysis looking at listings also shows that for selected cities new supply has grown faster in the last three months than the average increase in supply seen over the last 12 months. For all cities in England and Wales excluding London new supply has grown 10% faster than the 12 month average, this rises to over 15% in London.
In contrast, the relative change in sales over the last three months has registered a relative fall of 8% in London meaning that 8% fewer homes sold in the last three months compared to the 12 month average.
The relative change in Bristol is 0%, while in larger regional cities, where house price growth has been picking up momentum, the relative change is sales is positive at up to 7% in Manchester.
‘This analysis shows how recent sales momentum in regional cities, and higher house price growth, appears to have held up over the referendum period. In contrast, the headwinds facing the London market ahead of the vote have resulted in more supply and relatively fewer sales pointing to slower house price growth in the months ahead,’ the report says.
Hometrack explains that this is something which is clearly evident at a more granular level across London’s localised markets where the highest value markets in central London are registering low single digit growth while in lower value, outer areas of London growth is still 15% to 20% per annum although showing clear signs of losing momentum.
‘While this listings analysis provides a snapshot of the last quarter, the reality is that it is still very early days to assess the true impact of the EU referendum vote on activity and house prices. Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year,’ the report adds.
‘The severity of a slowdown will depend upon the response of consumers and businesses to the uncertainty created by the decision to leave the EU and the impact this has on the economy. The early market activity data confirms our view that London will bear the brunt of any slowdown,’ it concludes.