The latest assessment of major UK cities' housing markets by property consultancy Hometrack shows more locations overhauling London in terms of price growth.
The headline rate of price growth in the 20 cities assessed by Hometrack stands at 7.2 per cent.
Over the past 12 months house prices in Manchester rose by 8.9 per cent, the highest rate of annual growth in the city since 2005. In contrast, London recorded growth of 7.3 per cent over 2016 - this is the lowest annual rate for three and a half years.
Hometrack says this highlights how the impetus for house price growth is shifting from the capital to regional cities.
Other cities to outperform London over the last 12 months include Oxford (8.1 per cent), Portsmouth (8.0 per cent), Southampton (7.9 per cent) and Birmingham (7.5 per cent).
In the capital house prices are now on average 14.2 times earnings, which is a record high level of housing unaffordability and points towards a period of price re-adjustment over the coming years.
The only city to surpass the growth seen in Manchester was Bristol, where prices increased by 9.6% over the last 12 months - although Hometrack warns that affordability pressures here are expected to lead to a slowdown in growth in 2017.
â€œThis latest house price index reveals how the impetus for house price growth is shifting to more affordable cities where the recovery in house prices has been more muted in recent years. Price rises are gaining momentum in cities where low mortgage rates are yet to be fully priced into housingâ€ says Richard Donnell, Insight Director at Hometrack.
â€œIn Manchester underlying conditions remain strong, with the supply of homes for sale only just managing to keep pace with demand. This is keeping the upward pressure on house prices. A similar picture is emerging in other regional cities such as Birmingham and points to continued, above-average price inflation in regional cities over the next 12 months.â€
Donnell concludes: â€œ2017 looks set to be a year when the north-south divide for house prices might finally start to narrow once again.â€
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