House prices steam ahead in London as bubble fears rise

London house prices shot up by a further 5 per cent in the first three months of 2014, prompting new fears of a property bubble in the capital.

Prices in London are up 18 per cent year on year in the first quarter, the fastest annual growth rate since 2003, according to the latest survey by Nationwide.

The increase takes the average London house price to £362,699. Nationwide said that this was more than double the price of an average home in the rest of the country, a record premium for prices in the capital.

Across the UK there was a slight moderation in house price growth in March, as the rate of inflation eased to 0.4 per cent, down from 0.7 per cent in February. But economists said that London was a growing cause for concern.

Matthew Pointon of Capital Economics said: "London is looking far more like a bubble." Susan Emmett, director of residential research at the estate agency Savills, said: "We are wondering whether this level of price growth in London is sustainable. What we think is going to happen is people will start leaving London in search of better value."

The Nationwide data showed that the average first-time buyer house price-to-income ratio in London reached a record high of eight times in the first quarter of 2014.

Calls have been made for the Bank of England to take action to cool the capital's market, but Threadneedle Street has sought to play down expectations of what powers the regulator has. Officials at the Bank point out that foreign cash buyers have been driving the London market, reducing the effectiveness of its array of macroprudential tools, such as placing tighter loan-to-value limits on bank mortgage lending.

Nationwide said that house prices across Britain were 9.5 per cent higher year on year in March. But analysts said this could ease in the coming months.

"The base effects which had been flattering the annual comparison will now start dropping out," said Mr Pointon. "If prices continue to grow at 0.4 per cent month on month for the rest of the year, prices for 2014 as a whole will be up by just over 6 per cent."

The latest Markit/Cips snapshot of the construction sector showed activity growing for the 11th consecutive month in March, with residential building the most rapidly expanding sector.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot