London house prices in Q3 2016 rose 0.9 per cent, the lowest quarterly growth rate since January 2015, according to the latest Hometrack UK Cities Index.
The Hometrack report says: “This is the lowest quarterly growth rate since January 2015 when fears of a potential housing bubble, a tightening of mortgage credit and concerns over the introduction of a mansion taxed gripped the market.
“Today, stretched affordability levels and new taxes for investors are impacting demand while supply continues to grow, reducing the upward pressure on house prices in London.”
The overall rate of inflation for the UK Cities House Price Index has remained steady month-on-month.
The annual rate of growth in September was 8.5 per cent compared to 5.7 per cent 12 months ago.
Hometrack says house price inflation is more than three times faster than growth in earnings despite Brexit uncertainty.
Eleven of the 20 cities that form part of the index have seen house prices continue to accelerate in the year to September 2016.
The remaining nine cities are seeing house price growth that is lower than it was at the start of 2016 with the greatest reduction seen in Cambridge, Oxford, London and Aberdeen.
London has the weakest market conditions with the new supply of homes coming to the market growing faster than sales, which have fallen back in recent months on weaker demand.
The ratio of sales to new supply is at its highest level for three years, reinforcing the outlook for a continued slowdown in the rate of house price growth across London in the months ahead.
Hometrack insight director Richard Donnell says: “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 home owners face stretched affordability levels which are combining to slow the rate of house price growth.”
