London is ‘dragging’ on average house prices across UK’s top 20 cities

UK city house prices rose by 2.9 per cent over the 12 months to January 2019 but London has become a “drag” on the housing market after slow growth in the capital.

The latest Hometrack Cities Index, which looks at house prices across Britain’s top 20 major cities, showed prices are rising fastest at six per cent in Leicester, followed by 5.8 per cent in Belfast and 5.4 per cent in Manchester.

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But house price inflation in London was virtually flat at 0.2 per cent, showing the second slowest growth of the 20 cities outside of Cambridge.

Aberdeen was the only city where prices fell, as they dropped 1.6 per cent. The average house price in the Scottish city is down £34,000 from mid-2015, at the time of the collapse in oil prices.

The data showed how the weakest housing markets have the longest sales periods and largest discounts, which is currently Aberdeen and inner London, where discounts on asking prices reach seven per cent on average, with it taking 16 weeks to sell, on average.

Of the 20 cities, three of the bottom four for growth did have the highest average house price still, with London, Cambridge and Oxford all above £400,000, while no other city averaged more than Bournemouth's £287,700, among the UK's average of £216,600 in these cities.

“This price growth continues to be driven by affordable locations at the bottom end of the house price ladder and in these slower market conditions, it’s only natural that the more desirable UK cities will see prices growth flatten and the time to sell extend, due to the already inflated price of getting a foot on the ladder there,” said Marc von Grundherr, director of Benham and Reeves.

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“Of course, the commitment of investing in the inner London market at present is likely to take a bit more thought than it may have previously, but to label London as a ‘drag’ and to liken the market strength to that of Aberdeen is a tad misleading," he added.

“Prices are holding firm, transactions are steady and London remains the pinnacle of the UK housing market, having emerged from the negative price trends of the previous year.”