Lower house price growth is “set to be the new normal,” according to analysis by property site Zoopla.
It said in a report published on Monday the average home in UK cities had increased by 54% over the past decade, up £90,000 in value.
But it predicted lower average growth of 3% in cities in the year ahead, compared to an average of 4.4% a year over the past decade.
The past three years have seen a slowdown in the property market, particularly in London, the south and east of England as Brexit uncertainty, tax reforms, and a weaker economy have dampened growth.
Growth in London has edged upwards recently to 1.7%, with a lower number of homeowners willing to sell fuelling increased competition. But that still marked a growth rate just a third of the 5.4% average for the past 10 years.
Zoopla predicts only a limited level of pent-up demand to increase sales and prices in the wake of the election result, with average city price growth of 3% forecast in 2020.
Richard Donnell, research and insight director at Zoopla, said: “The election result provides an element of certainty for households looking ahead to 2020, but the result changes very little in terms of housing market fundamentals.
He said affordability was key, and would “dictate the level to which prices will increase” in the year ahead.
Donnell said falling prices and rising wages had given only a “modest” boost to affordability in southern cities such as London, Oxford, and Cambridge.
The price-to-earnings ratio, a key measure of affordability, has dropped by 10% in London from a 20-year high of 14 times average incomes in 2017. But prices remain 12.7 times higher than average pay in the capital, with many Londoners’ chances of getting on the property ladder still slim.
Zoopla’s analysis suggests the boost to prices from lower interest rates has run its course, “which means house prices are set to rise at a lower rate in future,” closer to average earnings.
But the picture varies significantly by region, with cities where property is cheapest typically recording the highest recent, current, and predicted future growth.
Zoopla said the most affordable cities, such as Glasgow, Liverpool, and Belfast, had seen growth twice as fast as the UK average over the past decade.
While the property site’s analysts expect the affordability problem to hold down growth to 2% across London in 2020, they expect growth of up to 4% in the most affordable cities.
The figures also show Edinburgh, where the average home costs around £21,000 more than the UK average at around £241,000, has seen the fastest growth over the past year. Prices rose 5.4% in the year to November 2019.
Donnell added: “As we start the next decade in housing, a top priority for the new Government is to ensure we look to remove the barriers to households moving home, with housing policy catering to the different market conditions across the country, while increasing housing choice across all tenures.”