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?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Mortgage Administration Team Leader

Negotiable: Recruitment Genius: This company prides itself on its ability to p...

Recruitment Genius: Mortgage Advisor

Negotiable: Recruitment Genius: This company prides itself on its ability to p...

Ashdown Group: Solvency II Project Manager - 10 month contract - £800 p/d

£800 per day: Ashdown Group: A highly successful, global financial services co...

SThree: Trainee Recruitment Consulant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

Day In a Page

A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms
What turns someone into a conspiracy theorist? Study to look at why some are more 'receptive' to such theories

What turns someone into a conspiracy theorist?

Study to look at why some are more 'receptive' to such theories
Chinese web dissenters using coded language to dodge censorship filters and vent frustration at government

Are you a 50-center?

Decoding the Chinese web dissenters
The Beatles film Help, released 50 years ago, signalled the birth of the 'metrosexual' man

Help signalled birth of 'metrosexual' man

The Beatles' moptop haircuts and dandified fashion introduced a new style for the modern Englishman, says Martin King
Hollywood's new diet: Has LA stolen New York's crown as the ultimate foodie trend-setter?

Hollywood's new diet trends

Has LA stolen New York's crown as the ultimate foodie trend-setter?
6 best recipe files

6 best recipe files

Get organised like a Bake Off champion and put all your show-stopping recipes in one place
Ashes 2015: Steven Finn goes from being unselectable to simply unplayable

Finn goes from being unselectable to simply unplayable

Middlesex bowler claims Ashes hat-trick of Clarke, Voges and Marsh
Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Atwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works