House price gap between London and regional cities set to narrow over next two years

House prices in London rose by 0.4 per cent in the last year, compared with the UK average of 4.3 pe

House prices in London rose by 0.4 per cent in the last year, compared with the UK average of 4.3 per cent - Credit: Getty Images/iStockphoto

The property price gap between London and other cities around the UK is predicted to narrow in the next two years according to figures published by Hometrack

The latest analysis conducted by Hometrack’s UK House Price Index has revealed that prices fell across 20 of London’s 33 local authorities in the last year.

This is part of a wider trend that has seen the gap between the capital’s house prices and regional cities around the country narrow, mirroring the trend between 2002 and 2005.

While average house prices in London rose by 0.4 per cent over the year, Edinburgh’s surged by 7.1 per cent, Manchester’s by 7.0 per cent and Birmingham’s by 6.5 per cent. These numbers are all significantly higher than the UK average, which was 4.3 per cent.

Jonathan Stephens, MD at Surrenden Invest, said: “While many factors mirror the housing market’s performance back in the early 2000s, there are some substantial differences that look set to bring about different outcomes from this state in the cycle.

“Tax changes are playing a key role in this, as are the rising quality and security standards of regional city developments.”

Elsewhere, analysis by PwC projected a fall in London property prices until 2020.

In a report published on Friday July 13, the firm predicted that the capital’s average house price could drop by nearly two per cent in 2018 compared to last year, and house price inflation could continue to be negative in to 2019.

Mr Stephens adds: “Are we likely to see the regions catch up relative to London in terms of their property prices? Probably not, as London remains a uniquely appealing market.

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“However, what we are likely to see is a sustained and significant narrowing of the price gap, as regional cities hold fast in the wake of London’s price correction.”