This is the highest rate of growth for two years, following a period of year on year price falls.
Today, house prices are registering month on month price falls in less than a quarter of London’s housing markets – well down on the 85% of markets registering price falls a year ago and the lowest coverage of price falls since May 2017. Over three quarters of London’s homes are in markets registering small month on month price increases, which have lifted the overall annual growth rate to +1%.
The shift in London house price momentum is down to a decrease in the number of new properties for sale, which has restricted supply. This is a trend that has been developing for the last 12 months and has been accelerated by the announcement of the election on 12th December.
Additionally, Zoopla data shows a notable increase in the number of sales agreed per agency branch; while this increase is off a low base, it indicates that there is renewed demand for housing in London after a sizable drop in sales volumes over the last three years.
More realistic pricing
More realistically priced homes are the final ingredient supporting improved market conditions in London. In early 2016, when demand started to weaken, the market grappled with a 20% gap between the price of new listings coming to the market for sale and the price of property being marked as sold on Zoopla.
This gap has steadily closed over the last four years to a more sustainable level of 5%. We believe this will support growth in the number of sales in London over 2020, although we still expect house price growth to remain in low single digits.
A regional slowdown
While London’s housing market has been through an extended slowdown, accompanied by lower sales, large regional cities – once the engines of house price growth – are starting to show signs of slower growth. House price growth since the start of 2017 has exceeded 15% across Edinburgh, Leicester, Manchester and Birmingham, but the pace of growth is slowing. All the cities covered by the index are registering price growth of less than 5% per annum – a trend that has become established over the last quarter. This is the first-time growth across all cities has been below 5% since November 2012.
Scottish Stagnation: Edinburgh and Glasgow
North of the border, house price growth remains steady in Edinburgh and Glasgow at 4.0% and 2.6% respectively. However, this October report marks the four-year anniversary of consecutive year on year house price falls in Aberdeen caused by the collapse in the oil price in 2015.
Richard Donnell, Research and Insight Director at Zoopla, said: “After a three-year repricing process accompanied by a sizable decline in housing sales, the London housing market is finally showing signs of life. The shift in momentum is clear, resulting from a lack of supply, increased sales and more realistic pricing, which bode well for higher sales activity in 2020, rather than a pick-up in house price growth.
While the London housing market has been in the doldrums, market conditions in regional cities have been stronger over the last two years with demand supported by employment growth and attractive housing affordability. The rate of growth is slowing, and all cities are registering annual growth of less than 5%.
The announcement of the General Election has brought forward the usual seasonal slowdown, but the last few weeks of the year pre-Christmas tend to be much quieter than after Boxing Day, when consumer interest in housing springs back to life.”
