"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."
The latest Hometrack UK Cities House Price Index shows that Bristol remains the fastest growing city in the UK with a year on year growth rate of 14.7%, but year-on-year house price inflation in London and in other cities in the south of England, such as Cambridge, Southampton and Bournemouth started to slow between May and June.
However large cities in northern parts of the UK such as Glasgow, Manchester, Liverpool and Leeds have registered strong growth in the last quarter on the back of more affordable prices, lower interest rates, improving local economies and higher yields.
While recent sales momentum in regional cities appears to have held up over the referendum period, the headwinds facing the London market ahead of the vote have resulted in rising supply and relatively fewer sales, pointing to slower house price growth in the months ahead.
New listings have grown faster in the last 3 months than the average seen over the last year. For all cities in England and Wales, excluding London, new listings have grown 10% faster than the 12 month average, rising to over 15% in London.
In contrast, the data an 8% relative fall in sales in London. The relative change in Bristol is 0%, while in larger regional cities, where house price growth has been picking up momentum, the relative change is sales is positive at up to 7% in Manchester.
Richard Donnell, Insight Director at Hometrack, said: “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.
“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.”
