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London's house price inflation growth slows

Wednesday 26th October 2016

House price inflation in London witnessed its lowest quarterly growth for 20 months in the three months to September, the latest Hometrack UK Cities Index has found.
 
Average house price growth totalled 0.9% in the three months to September, the lowest quarterly growth rate since January 2015, a time when fears of a tightening of mortgage credit, a possible housing bubble and worries over the introduction of a mansion tax were rife. 
 
Currently, new taxes and legislation on buy-to-let investors/landlords and stretched affordability are having an impact on demand while supply continues to increase. This, in turn, has reduced the upward pressure on house prices in London.
 
The UK Cities House Price Index also revealed the overall headline rate of inflation has remained broadly steady month-on-month, with the yearly rate of growth in September reaching 8.5%, up from 5.7% a year ago. What's more, residential values in the major UK cities are witnessing a higher rate of growth (8.5%) than the rest of the UK, where house prices are increasing by 7.2% year-on-year. 
 
House prices have continued to rise in 2016 for eleven of the 20 cities that make up the index. In particular, large cities outside the south east – Liverpool, Birmingham, Manchester and Cardiff – have experienced the biggest growth, driven by good affordability and prices growing from a lower base. 
 
By contrast, price reductions have been seen in places such as London, Cambridge, Oxford and oil-rich Aberdeen. 
 
In London, for example, market conditions are the weakest of any city in the Index. The capital is seeing new supply of homes rising faster than sales, which have dropped back in recent months thanks to weaker demand. As such, prices in London are expected to continue to see a slowdown in the coming months, unless sales start to outstrip supply again. 
 
“In the immediate aftermath of the vote to leave the EU there was little obvious impact on the housing market and the rate of house price growth,” Richard Donnell, Insight Director at Hometrack, commented. 
 
“Three months on and it is becoming clearer that households in large regional cities outside southern England continue to feel confident in buying homes and taking advantage of record low mortgage rates where affordability remains attractive for those with equity. In London market conditions are the opposite and new taxes are hitting investor demand while home owners face stretched affordability levels which are combining to slow the rate of house price growth.”
              

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