Annual house price growth plateaued in June, at 10.2%, the same level as May, but still ahead of the 6.9% rise recorded in June last year, according to the latest Hometrack UK Cities House Price Index.
Bristol remains the fastest growing city in the UK for house prices, with a yearly inflation rate of 14.7%. However, annual house price growth in London and other cities in the south of England, such as Cambridge, Southampton and Bournemouth, started to slow between May and June.
Annual House Price Growth Plateaus in June
In contrast, large cities in northern parts of the UK, such as Glasgow, Manchester, Liverpool and Leeds, have recorded strong growth over the past quarter, due to more affordable house prices, lower interest rates, improving local economies and higher rental yields, making purchases particularly attractive to landlords.
Following the UK’s vote to leave the EU, attention has turned to the impact of Brexit on the economy and property market. However, time lags mean that official data is slow to pick up on changes to housing. The final pre-Brexit house price data, from the Land Registry, found that house prices have risen by 8.1% annually.
The Hometrack data, which covers recent market activity up to the middle of July, shows changes in the balance of supply and sales, providing an early insight into whether housing supply is starting to expand, which could in turn reduce price growth.
In the three months to mid-July, sales momentum in regional cities and higher house price growth appear to have remained steady. However, the headwinds facing the London market ahead of the EU referendum on 23rd June have resulted in a rise in supply and relatively fewer sales, indicating that house price growth may slow in the coming months.
Hometrack also found that new property listings have grown faster in the last three months than the average for the past year. For all cities in England and Wales, excluding London, new listings have increased 10% faster than the 12-month average, rising to over 15% in the capital.
In contrast, an 8% relative fall in sales was seen in London over the last three months, compared to the 12-month average. Sales in Bristol did not change over this period, while sales growth has been positive in larger regional cities, at up to 7% in Manchester.
The Insight Director at Hometrack, Richard Donnell, comments: “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. 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.
“In contrast, in many large regional cities, sales appear to have held up, thanks to a combination of much better housing affordability, improving economic growth and record low mortgage rates helping to stimulate demand.”
He concludes: “The reality is that it is still very early days to assess the true impact of the Brexit vote on the housing market. 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.”