House price growth in London has hit a seven year low according to Hometrack, with prices actually down across 42 per cent of postcodes.
The consultancy’s latest cities price index shows that with over two fifths of postcodes showing annual price falls, the headline rate of house price growth across the capital has slowed to just 1.0 per cent, down from 4.3 per cent a year ago.
This is the lowest annual rate of growth since August 2011.
In contrast, regional cities such as Edinburgh, Liverpool and Manchester are registering house price growth in excess of seven per cent per annum.
The slowdown in the capital is primarily driven by single digit price falls across inner London. Fifteen of the 46 local authorities that make up the London index are experiencing price falls.
Hometrack says house prices continue to increase across the majority of London postcodes but the number registering positive growth has declined over the last 12 months.
The consultancy says this is a result of numerous tax changes impacting overseas and domestic investors and stretched affordability levels for owner occupiers that have been compounded by Brexit uncertainty. The majority of these markets are falling by as much as 5.0 per cent annually with no signs of any acceleration in the rate of price falls.
The downward pressure on house prices is greatest across inner London areas where prices are highest prices and yields lowest, and where there is a greater share of discretionary buyers. The time it takes to sell a residential property in inner London has risen to 18 weeks, almost double that of outer London and the city’s commuter areas.
Based on current trends, Hometrack expects year on year house price growth for the capital as a whole to shift into negative territory by the middle of 2018.
In contrast, house price growth outside southern England remains robust, well ahead of the growth in earnings.
Half of cities covered by the index are recording higher price growth than a year ago while the other ten are registering lower growth led by Bristol, Southampton and London.
Prices are falling in Cambridge (down 1.5 per cent) and Aberdeen (down 7.7 per cent) – Hometrack says Cambridge is performing like an extension of the London housing market.
There are five cities registering house price growth in excess of seven per cent - Edinburgh, Liverpool, Leicester, Birmingham and Manchester.
“The weakness in London’s housing market has been building since 2015 on the back of numerous tax changes aimed at overseas and UK investors and growing affordability pressures facing home owners. Sales volumes are first to be hit when demand weakens and housing turnover across London is down 17 per cent since 2014” explains Richard Donnell, insight director at Hometrack.
“We expect the balance of markets registering price falls to increase over 2018 as prices continue to adjust to what buyers are prepared to pay. Average London house prices are up 86 per cent on 2009 levels so there is a sizable equity buffer to absorb any price falls” he adds.