House price growth across many southern cities also remains flat. In Cambridge (2.3%), Oxford (2.3%) and Cardiff (2.4%) the annual rate of growth is below the general rate of inflation.
In contrast, cities in Scotland have seen an acceleration in house price growth. Housing sales in Scotland over the last quarter have increased by 20% when compared to the previous 12 months.
Edinburgh now tops the list of UK cities ranked by price growth at 6.7%. Manchester has dropped to second place with annual growth of 6.5% followed by Birmingham at 5.9%.
Glasgow has also registered a significant uptick in house price growth, rising from 1.8% a year ago to 5.6% today. Meanwhile, in Aberdeen house prices have been falling for the last 2.5 years but the year-on-year growth rate of -1.8% is the slowest rate of price falls for two years.
Overall the headline rate of annual growth across UK cities is running at 4.9% compared to 6% twelve months ago.
Richard Donnell, Research and Insight Director at Hometrack, said: “The London housing market is now firmly stuck in neutral. Stretched affordability, low yields for investors and concerns over Brexit and its impact on employment are weighing on market sentiment. As a result, further house price falls in real terms across London are inevitable as prices re-align to what buyers are willing to spend. Consequently, nominal house price inflation in London looks set to remain between 1% to 3% over the next six to twelve months.
However, house prices look likely to continue rising in regional cities as affordability remains attractive and values are growing off a low base. The rate of growth is expected to moderate around its current level and will be tempered by economic and sentiment factors such as the squeeze on incomes from rising inflation and concerns over the economic outlook. Talk of a possible increase in interest rates and any knock-on effect for mortgages, is also likely to further temper demand.
A modest increase in mortgage rates will primarily impact sentiment and levels of market activity. Mortgage rates remain low by historic standards and for the last three years, all homeowners buying with a mortgage have had to prove they can afford a much higher mortgage rate. As a result, recent sales levels already reflect the ability of buyers to afford higher borrowing costs which should mean there is capacity for borrowers to absorb increased monthly repayments.”
Russell Quirk, founder and CEO of eMoov.co.uk, commented: "As the final stretch of 2017 comes into view a late flurry of city-based property transactions has seen a degree of stability return to the market. Due to the generally higher price tag of city living, it is these areas that have been impacted by recent market uncertainty the most and although growth is still down year on year, it will be a promising sign for these homeowners.
Unfortunately for London, it continues to be last year’s must-have, waning in popularity amongst buyers due to the high price of the capital's property, while the hottest trend for 2017 is currently tartan, as Edinburgh shows extremely strong growth to overtake Manchester for the top spot.
That said, poor Aberdeen remains the toffee penny in a seasonal box of Quality Streets. Once such a firm favourite it is now consistently last where demand is concerned, left in the box long into the New Year, chosen by just a few who remember the glory days. Much as tastes for sweets today have shifted it is unlikely Aberdeen will find any new-found popularity amongst buyers and it continues to suffer from the decline in the oil industry.
Despite the overall renewed level of confidence, the market should continue to tread cautiously at least until the year is out. However, growth will remain subdued but consistent across the more affordable options such as Manchester, Birmingham, Leicester and so on.
London, along with the other over-inflated cities such as Oxford and Cambridge, will no doubt continue to struggle due to their much higher price tags, and these areas will be the last to see any meaningful return of buyer demand."
