London house prices rise by 9.7%
House prices in London have risen by nearly 10% in the last year, adding to signs of a sharp north-south divide in the market.
A 9.7% increase in prices in London over the year to July helped to push the value of homes across England to a new high of £255,000 on average, the Office for National Statistics (ONS) said.
House prices in London and the South East both raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively, while prices in the East of England and the South West also edged close to their previous highs.
But the UK market was still patchy and while house prices were up by 3.7% year-on-year in England they dropped by 2% in Scotland and 0.7% in Wales. Prices in Northern Ireland were up by 1.8% year-on-year as the market showed signs of starting a slow recovery after some sharp falls following the economic downturn.
The annual pace of house price inflation picked up across the UK in July to its fastest rate recorded in 2013 so far at 3.3%, taking values to £245,000 on average. Prices rose by 0.3% month-on-month.
Concerns have mounted in recent weeks that Government initiatives to kick-start the housing market such as Funding for Lending and Help to Buy are in danger of creating a property bubble, with borrowers over-stretching themselves as access to low-deposit deals returns.
Last week, the Royal Institution of Chartered Surveyors (Rics) suggested that a 5% cap should be placed on annual house price growth to stop any future house price bubble and borrowers taking on too much debt for fear of missing out on a boom.
Matthew Pointon, property economist at consultancy Capital Economics, described London as a "special case", with prime central London in particular seen as a safe haven for overseas buyers to place their cash. He said some areas of London are seeing "bold behaviour" from buyers. In the short term, a shortage of homes on the market in London is likely to spell further price gains in the capital, he predicted.
Peter Rollings, chief executive at London-based estate agents Marsh & Parsons, described the London market as telling "a different story" to the rest of the UK. He said: "The huge demand for property in the most desirable parts of the capital, from both UK and overseas buyers, is helping to push prices higher. In the three months to June, we recorded 11% more buyers entering the market in competition for 14% fewer properties. Property is changing hands in record time and for close to the asking price."
At £132,000 on average, house prices in Northern Ireland are still 49% below a previous peak recorded in 2007. Prices in Scotland are around £182,000 and are sitting 6% below their previous high, which was recorded in 2008. House prices in Wales are 7% below their 2008 peak, and currently stand at £160,000 on average.