London house prices rise 26% in fastest growth since 1987
07-04-2014
House prices in London rose at their fastest rate since 1987 over the last three months – rocketing 26% with the average property valued at £400,000 for the first time.
The capital’s house prices rose 25.8% on a year earlier in the three months to June, according to figures from mortgage lender Nationwide.
Prices across the UK rose at their fastest annual pace in more than nine years last month, up 1% following a 0.7% rise in May. This took the annual rate of increase to 11.8% - the biggest rise since January 2005.
Nationwide's chief economist Robert Gardner said: "The price of a typical property in London reached the £400,000 mark for the first time, with prices in the capital now around 30% above their 2007 highs and more than twice the level prevailing in the rest of the UK," said
Average house prices outside the capital are a fraction below their 2007 peak and the number of transactions are still well below their historic average.
The figures throw into sharp relief the challenge facing the Bank of England as it tries to stop a regional housing boom from destabilising the rest of the economy.
Nationwide said this cap and new tighter affordability checks were unlikely to slow house price growth in the short run, but that the prospect of higher interest rates might.
Speculation that the Bank will raise interest rates later this year or early in 2015 was already pushing up longer-term market interest rates, Gardner said.
He added: "If this is sustained, it is likely to feed through to mortgage rates, which would also help to prevent buyer demand rising too strongly."
But Nationwide said the underlying pressure on house prices came from a lack of new homes being built - a view shared by the Bank, which says its focus is on debt rather than house prices.
Additional reporting by Reuters