UK house price growth slows with London the weakest performing region

House prices grew by 2.6 per cent across the country in 2017

Average UK property prices were £211,156 in December (Getty)

UK house price growth slowed last year, with prices in London falling for the first time in eight years, according to new data from Nationwide.

The building society said that house prices grew by 2.6 per cent across the country in 2017, compared to growth of 4.5 per cent in 2016.

London was the weakest performing region for the first time since 2004, with house prices falling 0.5 per cent year-on-year.

Average UK property prices were £211,156 in December, up 0.6 per cent from the previous month.

“Low mortgage rates and healthy employment growth continued to support demand in 2017, while supply constraints provided support for house prices,” said Robert Gardner, Nationwide’s chief economist. “However, this was offset by mounting pressure on household incomes, which exerted an increasing drag on consumer confidence as the year progressed,” he added.

Nationwide now expects house price growth to be just 1 per cent in 2018, with subdued economic activity and the ongoing squeeze on household budgets exerting “a modest drag on housing market activity and house price growth”.

“Over the longer term, once the economy regains momentum, we expect house prices to rise broadly in line with earnings, though if the rate of house building fails to keep up with population growth, prices may outpace earnings once again, as they have in recent years,” said Mr Gardner.

“The UK housing market has been characterised by significant regional disparities in house prices in recent years and it is not clear how Brexit will impact these dynamics. Much will depend on the nature of the Brexit impact on the UK economy,” he added.

The fastest growing region in 2017 was the West Midlands with house price growth of 5.2 per cent over the year. This was followed by the South-west at 4.8 per cent and the East Midlands at 4.6 per cent.

Britain’s biggest building society said that while regional house price growth rates have converged over the past year, there remain significant differences in affordability.

On average, a 20 per cent deposit in London is now in excess of £80,000, or around £30,000 higher than a decade ago. In other regions, such as the Midlands and Northern England, deposit requirements have changed much less since 2007.

“The major surprise during 2017 was undoubtedly the slowdown in London house prices. It’s been 13 years since the capital sat at the bottom of the house price growth table, and since then we have seen prices surge to unprecedented and unaffordable levels,” said Alex Gosling, founder of online estate agents HouseSimple.com.

“Fortunately, there’s no longer the reliance on the London market to prop up the rest of the country. Growing regional business hubs have seen other major UK cities prosper, while London has suffered as property prices have become unaffordable for the majority,” he added.