City house price inflation is running at 5.3%. The sharp slowdown in London house price growth over the last year has reversed with an increase in the annual rate over the last month rising from 2.3% to 2.8%.
City house price growth 5.3% yoy
The UK City house price inflation is running at 5.3% compared to 7.4% in July 2016. The rate of growth has picked up in recent months thanks to above average growth in large regional cities and an increase in the annual rate of growth in the London City index.
Birmingham is the fastest growing city (8.0%, up from 6.8% in July 2016). The rate of growth has been consistent over the last year and trending upwards on sustained demand, a lack of homes for sale and attractive affordability. Manchester (7.1%) and Nottingham (6.9%) are the second and third fastest growing cities.
Aberdeen continues to register year on year price falls (-3.0%). House prices in Aberdeen have been registering negative annual growth for exactly 2 years. Average house prices are 16% lower since December 2014 as the fall in oil prices impacted the economy.
London City house price growth ‘bottoms out’
The annual rate of growth in London has increased to 2.8% marking an end to the steep slowdown over the last 18 months. Figure 2 shows the annual and 3 month growth rate for London City. It shows how prices were unchanged over 2016H2 in the wake of the Brexit vote, while over the last 5 months the index has recorded positive growth, albeit at a relatively low level.
This stabilisation in the rate of London City house price growth is down to two main factors; 1) lower transaction volumes and 2) an absence of forced sellers. Housing turnover across London has fallen by 17% since 2015 as affordability pressures and recent policy changes impact demand. In the absence of a jump in borrowing costs, or other adverse economic factors, sellers are slow to accept downward adjustments in prices in the face of weaker, price sensitive demand.