London prices ‘set to fall in real terms’

A new Hometrack report predicts London prices will rise by between 2 and 3 per cent this year but, with inflation already running at 2.7 per cent in the UK, the end result could be a drop in the capital in real terms.Hometrack’s index of 20 major UK towns and cities showed that, in the year to April, London house prices were rising at an annual rate of 3.5 per cent, the lowest for five years and compared to 13 per cent in the year to April 2016.

Increasing inflation

“With the level of inflation increasing, this means London is set to record a real-terms drop in prices over 2017, the first time this has happened since 2011,” said the report.Other areas in southern England, where house price rises have been running at a rate outstripping wage increases, are also experiencing a substantial cooling in price growth.Year-on-year, Oxford house prices fell 0.6 per cent in April, compared to an annual rate of increase of 8.4 per cent in April last year. In Cambridge, house price growth was 2.2 per cent this April, compared to 13 per cent a year earlier, while the rate in Bristol has decreased from 12.9 per cent to 5.9 per cent over the year.

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Weaker levels of demand

“This steep deceleration in growth reflects weaker levels of demand from home owners and investors in the face of affordability constraints, tax changes and weaker market sentiment,” said Hometrack.Manchester, however, continues to lead the way in UK house price growth, recording an 8.4 per cent rise in the year to April. “The ratio of sales to new supply in Manchester indicates relatively tight housing market conditions, which points to continued upward pressure on house prices,” said Hometrack.Richard Donnell, insight director at Hometrack, commented, “Outside southern England, we anticipate prices will continue to increase over 2017 as households take advantage of low mortgage rates and an improving economic outlook.”Average house prices in April and year-on-year change:Manchester, £155,000, 8.4 per centLeicester, £164,600, 7.7 per centBirmingham, £152,100, 7.7 per centNottingham, £144,400, 7.2 per centSouthampton, £225,600, 6.9 per centBristol, £265,700, 5.9 per centEdinburgh, £206,200, 5.8 per centBournemouth, £278,600, 5.4 per centPortsmouth, £224,600, 5.3 per centLeeds, £157,300, 4.6 per centSheffield, £131,700, 4.6 per centLiverpool, £115,800, 4.4 per centNewcastle, £126,200, 4 per centCardiff, £194,900, 4 per centGlasgow, £115,900, 4 per centBelfast, £129,100, 3.7 per centLondon, £489,400, 3.5 per centCambridge, £430,300, 2.2 per centOxford, £400,400, –0.6 per centAberdeen, £179,000, –3.8 per centFor related news and features, visit our Residential Property section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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