London house prices forecast to drop compared with inflation across year

House prices in London are predicted to fall in real terms across 2017 - marking the first time this has happened since 2011 - according to an index.

Property analysis firm Hometrack predicts house prices in London to be increasing by between 2% and 3% annually by the end of 2017 - which could mean values there fall in real terms when compared with inflation.

Hometrack's latest report shows annual house price growth in London is already running at less than a third of the levels seen a year ago.

In April, house prices there were increasing by 3.5% annually - compared with a 13% surge a year earlier.

House prices in London are now rising at the lowest rate seen for five years, Hometrack said.

Predicting a 2% to 3% rise in London property prices this year, Hometrack's report said: "With the level of inflation increasing, this means London is set to record a real terms drop in prices over 2017, the first time this has happened since 2011."

Office for National Statistics (ONS) figures showed the Consumer Price Index measure of inflation picked up to 2.7% in April - the highest level in nearly four years.

Some other cities in southern England - where house prices are already relatively high compared with local wages - have also seen a big cooldown in house price growth.

In Oxford, house prices fell by 0.6% annually in April. A year earlier, house prices in Oxford had been rising by 8.4%.

In Cambridge, house prices saw 2.2% annual growth in April, down from 13% in April 2016. Annual house price growth in Bristol has slowed down from 12.9% a year ago to 5.9%.

Hometrack's report said: "This steep deceleration in growth reflects weaker levels of demand from home owners and investors in the face of affordability constraints, tax changes and weaker market sentiment."

Hometrack, which monitors house prices across the UK's 20 biggest cities, found Manchester continues to record the strongest annual house price growth, with an 8.4% annual rise in April.

The report said: "The ratio of sales to new supply in Manchester indicates relatively tight housing market conditions which points to continued upward pressure on house prices."

Richard Donnell, insight director at Hometrack, said: "Outside southern England, we anticipate prices will continue to increase over 2017 as households take advantage of low mortgage rates and an improving economic outlook."

Here are the average house prices in April across the cities covered by Hometrack's index, with the annual change:

:: Manchester, £155,000, 8.4%

:: Leicester, £164,600, 7.7%

:: Birmingham, £152,100, 7.7%

:: Nottingham, £144,400, 7.2%

:: Southampton, £225,600, 6.9%

:: Bristol, £265,700, 5.9%

:: Edinburgh, £206,200, 5.8%

:: Bournemouth, £278,600, 5.4%

:: Portsmouth, £224,600, 5.3%

:: Leeds, £157,300, 4.6%

:: Sheffield, £131,700, 4.6%

:: Liverpool, £115,800, 4.4%

:: Newcastle, £126,200, 4%

:: Cardiff, £194,900, 4%

:: Glasgow, £115,900, 4%

:: Belfast, £129,100, 3.7%

:: London, £489,400, 3.5%

:: Cambridge, £430,300, 2.2%

:: Oxford, £400,400, minus 0.6%

:: Aberdeen, £179,000, minus 3.8%