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Annual growth in London is at its lowest level for nine years as five of the UK’s major cities are now seeing prices fall in real terms, Hometrack says.

Hometrack’s May UK Cities Index put annual growth in the capital at 0.4%, while four other major parts of the country – Belfast, Oxford, Cambdirge and Aberdeen – are all seeing returns below the 2.4% rate of inflation, meaning they are technically down in real terms.

The data, based on the UK’s 20 biggest cities, showed Aberdeen posted the largest annual fall at 5.7%, to £178,200.

Edinburgh topped the tables with growth of 7.1% to £225,300, closely followed by Manchester which was up 7% to £163,300.

London still has the highest house prices at £491,200 but Hometrack warned the gap was narrowing and would close further as growth in the capital continues to slow, while many regions are still well below their peak.

Overall, average prices across the 20 cities were up 4.6% to £257,200.

Richard Donnell, insight director at Hometrack, said he expects Manchester and Birmingham to close the gap on London first.

He said: “Naturally, the relative price gap between cities fluctuates over the course of the housing cycle as supply and demand is affected by factors such as economic growth, job creation, wage increases and the flow of new investment. This has certainly been evident in Aberdeen where the fall in the oil price has impacted housing demand and house prices.

“Hometrack expects that Manchester and Birmingham will close the gap to London fastest in the coming years as these cities are likely to see the strongest jobs growth.

“The level of house price inflation seen in large regional cities during the last peak, between 2000 and 2003, gives a good indication of how much prices may rise this time around. If history is to repeat itself and these cities are to get back to where they were, then prices could increase by as much as 20-25%.”

Source: Property Industry Eye

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