London house price growth behind UK average for the first time since 2008

House price growth in London was below the rest of the UK as buyers increasingly found themselves stretched by affordability

House price growth was relatively stable in 2016 but is likely to slow next year, Nationwide said. (PA)

The rate of house price growth in London has ended the year below the national average for the first time since 2008, according to Nationwide.

Prices in the capital only rose by an annual rate of 3.7 per cent in the last quarter, compared to the UK average of 4.5 per cent, the mortgage lender said.

Robert Gardner, Nationwide's chief economist, said: “There were signs that London’s significant period of outperformance may be drawing to a close.”

“In London and the South of England, more people have found themselves priced out of the market or had to borrow a greater multiple of their income, though low interest rates have helped reduce monthly mortgage costs.”

All regions saw house price growth in 2016, with East Anglia topping the table for the first time since 2010, with average prices up 10.1 per cent year-on-year, according to the index.

The 4.5 per cent annual increase in house prices across the UK recorded in December was the same as the same period last year, indicating that the housing market has been relatively stable over the past year, Nationwide said.

However, Britain’s vote to leave the EU in June is likely to weigh on the UK’s housing market next year.

Mr Gardner said the outlook for UK house prices in 2017 would “depend crucially on developments in the wider economy, around which there is a greater degree of uncertainty than usual”.

“Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth,” he added.

On Wednesday, Halifax said UK house prices will continue to rise in 2017 but at a much slower rate as a weaker economy, combined with falling affordability, would lead to fewer house sales.