Record Property Prices Fuel Bubble Debate
An annual surge of almost 10% in London's house prices has cast more fears about a bubble and highlighted a growing divide in the UK market.
The Office for National Statistics recorded a 9.7% increase in the capital over the year to July, helping to push the value of homes across England to a new high of £255,000 on average.
Prices in London and the wider South East were both found to have raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively.
Property prices in the East of England and the South West also edged close to their previous highs but while a 3.7% year-on-year increase was measured in England as a whole, prices dropped by 2% in Scotland and 0.7% in Wales.
Prices in Northern Ireland were up by 1.8% year-on-year.
North East and North West England both recorded falls of 1.3% and 0.7% respectively - highlighting a growing north-south divide, though the ONS said 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.
The price rises have prompted concerns 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.
In an interview with Sky News, the Business Secretary Vince Cable said the second phase of Help To Buy might have to be reconsidered while the Royal Institution of Chartered Surveyors (RICS) suggested that a 5% cap should be placed on annual house price growth to stop any future bubble.
Matthew Pointon, property economist at consultancy Capital Economics, described London today 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 were seeing "bold behaviour" from buyers and predicted that in the short term, a shortage of homes on the market in London is likely to spell further price gains in the capital.