House price growth in London hits two-year low, but other cities buoyant

London house prices grew at their slowest rate in almost two years as growth decelerated in the wake of the Brexit vote, but buyers elsewhere in the country showed more confidence in the market.

The capital’s property values edged up 0.9 per cent in the three months to the end of September, well below the 3 per cent average seen over the past three years, according to a report on the nation’s 20 largest cities by property analysts Hometrack.

London buyers must now shell out £480,500 for the average home, and despite record low interest rates many have now been priced out of the market. In addition, the London market is more dependent on investors, some of whom have been spooked by the potential effects of Brexit. A stamp duty rise introduced in April for buy-to-let landlords has also served to dampen demand, particularly for more expensive properties.

Hometrack says the slowdown is likely to continue as the number of homes on the market is now growing faster than completed sales, amid weak demand.

By contrast, cities outside the South-east have seen accelerated growth, with values in Bristol increasing faster than any other city, while Manchester, Liverpool, Cardiff and Birmingham all saw growth pick up after a flat period around the referendum.

Richard Donnell, insight director at Hometrack, said: “In the immediate aftermath of the vote to leave the EU there was little obvious impact on the housing market and the rate of house price growth.

“Three months on and it is becoming clearer that households in large regional cities outside southern England continue to feel confident in buying homes and taking advantage of record low mortgage rates where affordability remains attractive for those with equity.

“In London, market conditions are the opposite and new taxes are hitting investor demand while homeowners face stretched affordability levels which are combining to slow the rate of house price growth.”