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London house prices continue to outpace rest of the UK


London house prices are continuing to overwhelmingly outpace the rest of the UK housing market, as prices for the three months to June increased by 25.8% over the last 12 months.

As a result, the average home in London is not only higher than the pre-crisis peak in 2007, but they are also selling for over £400,000 for the first time in history.

All regions across the UK recorded a rise in the average house price for a fourth quarter in a row, but the figures show that London house prices are increasing at more than double the rate as the rest of the country.

The rest of the UK housing market grew a much slower rate of 11.8% over the last 12 months. However, despite the slower price increases outside of the capital, the national average house price still increased by the largest amount since January 2005.

The average house price in the UK is now 1% higher than the pre-crisis peak in 2007. However, because of the stark contrast between the levels of price increases in the capital and the rest of the UK, if London prices are excluded from the figures, then the average UK house price is actually still 0.4% below the pre-crisis peak.

Robert Gardner, chief economist at Nationwide said: "Most major lenders are already using a stress rate in their affordability calculation that is broadly consistent with the new stress test. Similarly, the proportion of house purchase loans at or above 4.5 times borrowers’ income is currently some way below the 15% cap.”

He added that because of these policy measures, along with the recent introduction of the Mortgage Market Review (MMR), rapidly increasing house prices should be protected from “becoming detached from earnings without derailing the recovery in the wider housing market."

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