"Growth in London has been superseded by large regional cities such as Manchester, Liverpool and Birmingham"
According to the latest data from Hometrack, house price growth in the captital has fallen to 6.4% - the lowest level since June 2013.
Compared to 2009, house prices in the capital are up 85%, but Hometrack expects the rate of house price inflation to slow towards 0% over 2017.
Its data shows that inner-London regions continue to register modest year-on-year price falls of up to 3% due to weaker demand than in outer London.
The headline rate of growth for the UK Cities House Price Index is now running at 6.9%, compared to 7.9% in January 2016.
Bristol remains the fastest growing city in the Index with annual growth holding steady at 9.5%, although down from a recent high of 14% recorded in June 2016.
Outside of southern England, Manchester is registering the greatest uplift with an increase of 8.3% in the last year. In addition to Manchester, London has also now been overtaken by Birmingham, and Liverpool, where similarly prices are rising off a lower base and affordability levels remain attractive.
Richard Donnell, Insight Director at Hometrack, said: “Growth in London has been superseded by large regional cities such as Manchester, Liverpool and Birmingham. When you consider that house prices in London are 85% higher than they were in 2009 it is not surprising that the pace of increases is slowing toward a standstill as very high house price increases mean affordability is stretched.
The contrast with large regional cities outside of London and the South East couldn’t be starker. They continue to register robust levels of house price inflation in excess of 7%. The question is how much further house prices in regional cities could have to run were house prices to fully ‘price in’ low mortgage rates supported by rising incomes and employment.
In our view there is material upside for house prices in the coming years in many cities where the recovery since 2009 has been limited. Typically those where investment in employment, infrastructure and regeneration will help stimulate the local economy. The timing and scale of future house price growth will, of course, depend upon the outlook for jobs, incomes and mortgage rates.”