London’s rising supply of homes on sale and relatively low level of transactions are “pointing to slower house price growth in the months ahead” according to Hometrack.
The property data consultancy’s latest UK Cities House Price Index reveals that annual house price inflation in major urban areas plateaued at 10.2 per cent in June, the same level as the previous month but well ahead of the 6.9 per cent seen a year earlier.
Bristol remains the fastest growing city in the UK in price terms with a year on year growth rate of 14.7 per cent. Large cities in northern parts of the UK such as Glasgow, Manchester, Liverpool and Leeds have also registered strong growth in the last quarter on the back of more affordable prices, lower interest rates, improving local economies and higher yields making purchases attractive to investors.
In contrast, Hometrack reports an eight per cent relative fall in sales in London per month.
“The headwinds that were facing the London market in the lead up to the EU referendum have intensified on the back of the vote to leave and are resulting in slower sales rates. It is still early days, and seasonal factors also need to be considered but the growth in new listings and slower sales points to slower price growth in the months ahead” according to Richard Donnell, Hometrack’s insight director.
“This growth in supply reflects a mix of new homes filtering through from London’s expanded development pipeline, investors looking to take capital gains, or selling to de-leverage their investments following the reduction in tax relief on mortgage payments for buy to let investors” he adds.
Donnell says that overall it is still too early to assess the true impact of the Brexit vote on the housing market - but London is likely to be the biggest loser.
“Our view remains that sales volumes are likely to slow and price growth will moderate over the second half of the year. 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.”