London agents were given the clearest possible warning this morning that prices will have to be cut – and that the re-pricing process is likely to last six months in a market that will continue to be hit by low turnover.
There are also signs of a slowdown spreading to some other cities in the south of the country.
But today’s north-south divide means that regions away from the south show no signs of slowing.
Hometrack, which released its UK Cities House Price Index this morning, said there had been a marked slowdown in house price growth over the last three months, led by a deceleration in London and other high-value cities across the south of England.
The annual rate of house price inflation across the 20 cities slowed to 9.5% in July after 12 months of higher growth.
Hometrack said the shift in momentum was due to growth stalling across a number of cities in southern England over the last quarter.
In the three months to July house prices in London rose by just 2.1%, the lowest quarterly rate since February 2015.
Bristol, the fastest growing city in terms of prices over the last 12 months, saw growth in house price inflation over the last three months slow to 2.6% from a high of 5% in May.
Prices in Cambridge fell by 1% in the last quarter although over the last 12 months prices are 7.1% higher.
However, Hometrack said that house price inflation in many large regional cities in the north of England and Scotland shows no signs of slowing. The rate of annual house price growth in Leeds, Manchester, Birmingham, Liverpool and Nottingham continues to rise by between 7% and 8%.
During the last quarter, the highest rates of growth have been registered in lower value, high yielding cities where prices are rising off a lower base – Glasgow (5.2%), Liverpool (4.4%), Manchester and Nottingham (3.4%).
Richard Donnell, insight director at Hometrack, said: “In the absence of adverse economic trends impacting employment and mortgage rates, the near term outlook is for a continued slowdown in London towards mid-single digit growth.
“The slowdown in London being seen across the market is not accounted for by seasonal factors with weaker demand from home owners and investors as supply grows.
“This analysis suggests London house price growth will continue to slow over the rest of the year. In contrast, northern regional cities will continue to register stable growth rates as households benefit from record low mortgage rates and affordability remains attractive.”
He went on: “We continue to believe that turnover will register the brunt of the slowdown in London.
“In the face of lower sales volumes, agents will look to re-price stock in line with what buyers are prepared, and can afford, to pay.
“Past experience shows that this process can run for as long as six months and relies, in part, on how quickly sellers are willing to adjust to what buyers are prepared to pay.”