House prices have recorded their strongest year-on-year growth in 18 months, in further signs that the market is gathering momentum, Nationwide has reported, with prices in London, which has had strong demand from overseas buyers, were 6.2% higher year-on-year, at £375,795 typically.
Prices nationally edged up by 0.4% month-on-month in May to reach £167,912 on average, the building society said.
House prices are now 1.1% higher than they were a year ago - marking the fastest annual increase seen since November 2011. The figures come as a YouGov poll found that an overwhelming majority of Londoners believe house prices in the capital will continue to rise.
Yesterday OECD economists warned that Chancellor George Osborne’s ‘Help to Buy’ mortgage scheme could inflate house prices. The news came one week after new figures showed that the average asking price for a house in London surpassed £500,000 for the first time.
The number of mortgages on the market has increased sharply since the Government introduced a scheme called Funding for Lending last August, which has given lenders access to cheap finance to help borrowers.
Separate Land Registry sales figures for England and Wales released today showed that house prices rose by 0.4% month-on-month in April to reach £161,458 on average, making them 0.7% higher than a year ago.
By contrast with London, house prices in the North East saw an annual 5.7% fall, taking them to £95,546 typically.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), has said new house price figures show a "yawning gap" between London and the rest of the country. He said:
The latest RICS survey suggests that the success of the Funding for Lending Scheme is bringing more tangible benefits to the market away from the capital and this reflected in the expectations that prices will begin to edge upwards in all the regions [...] over the coming year.
Buyer appetite has responded to the greater availability and accessibility of mortgage finance and the early indications are that the Help to Buy scheme is further boosting sentiment.
Londoners predicted house prices in the borough of Kensington an Chelsea will rise more in the next five years than any other London borough.
According to their predictions:
- Kensington and Chelsea - 44% put it in their top three, though it is already the most expensive, with an average house price of £1.5 million.
- Westminster - 35% of Londoners picked it, which saw the greatest rise in average house price, a staggering increase of 35.6% in 12 months.
Other boroughs fared less popular:
- The City of London - 29%
- Richmond upon Thames - 20%
- Hammersmith and Fulham and Kingston upon Thames - 10%
- Islington - 8%
- Wandsworth and Camden - 7%
- Greenwich - 6%
- Tower Hamlets - 5%
- Hackney and Southwark - 4%
- Harrow, Lambeth and Newham - 3%
And all other boroughs were below 2%.