£400,000 average house price in London fuels fear of boom

 
11 March 2014

London's average house price smashed through the £400,000 barrier for the first time last month as the capital’s remarkable property bubble gathered momentum.

Property values shot up by more than £10,000, or 2.6 per cent, in December alone, according to the Land Registry, reaching an average of £403,792.

The 11.2 per cent annual rise was the highest since summer 2010, when prices were bouncing back from the slump triggered by the global financial crisis.

Growing numbers of first-time buyers and a continuing shortage of homes for sale are thought to be behind the acceleration.

Agents have reported a doubling in the number of first-time buyer registrations in some parts of London as the recovering economy, record low mortgage rates and Government schemes such as Help to Buy all encourage potential purchasers.

Alex Gosling, director of estate agent Housesimple.co.uk, said: “The worry is that first-time buyers in the capital are being panicked into buying for fear that prices will run away from them.”

At the same time foreign money continues to pour into the capital, with turmoil in Egypt, the Ukraine and elsewhere all helping to bolster London’s “safe haven” status. Prices have soared from £300,000 to £400,000 in four and a half years, and have doubled from £200,000 in less than 13 years. They went through the £100,000 barrier in January 1997.

Last year prices rose the fastest in Hackney, where they went up 17.2 per cent to £502,129. Wandsworth was second, on 16.4 per cent, followed by Waltham Forest (16.2 per cent) and Hammersmith & Fulham (15.3 per cent).

The breakneck pace of London’s property inflation will sound alarm bells at the Bank of England, which faces the challenge of reining in the capital’s property market while still coaxing economic green shoots from much of the rest of the country. Prices rose only 1.1 per cent across England and Wales in December.

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Over the year they went up by 4.4 per cent, to an average of £167,353, according to the Land Registry.

Separate figures from the Nationwide building society showed UK prices rose 0.7 per cent in December to an average of £176,491, the 13th consecutive month of growth.

But Nationwide’s chief economist, Robert Gardner, also warned that many new owners have never experienced an interest rate rise, and may not be prepared for their mortgage bills to go up accordingly in the years to come.

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