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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test