London house prices are rising at their fastest annual rate in more than 11 years, as the gap between the capital and rest of the country continues to widen.
Prices in London rose 18.5pc year-on-year in May, nearly triple the 6.7pc annual increase seen across the country, according to Land Registry figures.
Average property prices in the capital are now £439,719, compared to an average of £172,035 for England and Wales.
London house prices jump rise 18.5pc in two-speed Britain
06-28-2014
Jump in house prices in London nearly triple the average increase in England and Wales
House prices are up 18.5pc in the capital Photo: REX
Source: Land Registry
Land Registry survey shows house price rises April and annual increase
Mark Carney, the Governor of the Bank of England, who on Thursday announced measures to head off a property bubble, said that while growth in house prices was not a problem yet, the size of the housing market made it one of the biggest potential threats to the economy.
However, while the Land Registry survey covers completed sales and is regarded as an accurate reflection of the market, it is unlikely to have captured recent changes which look to be taking the heat out of property prices.
These include, buyers unable to raise a big enough deposit due to high prices, buyers being refused loans due to stricter mortgage rules introduced in April, and growing worries about interest rate rises from a record low of 0.5pc.
This week, British Bankers’ Association data revealed mortgage approvals fell for the fourth month running in May and data from estate agency chains Your Move and Reeds Rains showed first-time buyer sales have dropped 4.5pc since the introduction of the Mortgage Market Review, which forces banks to test whether buyers can affored repayments.
This was before the Bank of England's new measures on Thursday, which capped mortgages of 4.5 times a borrower's income or higher to 15pc of new bank lending and will see lenders stress testing borrowers to see if they can repay home loans if interest rates hit 3pc
Mortgage approvals have fallen for the past four months. Source: BBA
Friday's Land Registry figures seemed to indicate a cooling in the property market, with month-on-month house prices across the country slowing in May to edge up just 0.4pc, while a separate survey from Hometrack for June said demand had weakened in the month with average price increasing just 0.3pc.
“Two months ago the survey pointed to signs of growing price resistance to higher prices among buyers against a backdrop of widespread talk of a possible housing bubble," said Richard Donnell, director of research at Hometrack.
"Pent-up demand has been feeding into the market over the last 18 months creating the upward pressure on house prices. This trend now appears to be running out of steam with no change in demand for housing over the month ... The proportion of households willing to enter the market appears to have plateaued for now until the outlook becomes clearer.”
Hometrack’s national monthly housing market survey is based on a monthly survey of estate agents and surveyors across all postcode districts across England and Wales