London house prices rose by a record 20.1%

House price inflation hits 10.5%

%VIRTUAL-SkimlinksPromo%House prices in London rose by a record annual rate of 20.1% in May as overall growth in the UK climbed to 10.5%, official figures showed today.

The average home in the capital now costs £492,000, compared to £262,000 across the country, according to the Office for National Statistics (ONS).
London house prices rose by a record 20.1%

The annual increase for house prices across the UK is the strongest since May 2010 but for London it is the sharpest since records began in 2002.

The ONS said: "House prices are increasingly strong across most parts of the UK, with prices in London again showing the highest growth."

Prices rose by 9.6% in the South East and 8.6% in the East, the figures showed.

Outside London and the South East, annual price increases averaged 6.4%, the highest rate since June 2010.

On a month-by-month basis, values jumped by 0.8% across the country, compared with a rise of 0.3% a month earlier.

The figures also show that first-time buyers face having to pay 11.3% more to get on the property ladder than they did a year ago, with the typical starter home now costing £202,000.

Every region in England saw an annual price uplift, with the lowest rate of 3.9% in the North West.

Prices overall in England rose by 11% over the year, with a 6.5% increase in Wales and 3.6% in Scotland while prices in Northern Ireland fell by 0.7%.

In London, the house price index is 33.7% above the pre-crisis peak level while England has recovered to just 8.9% above and Scotland, Wales and Northern Ireland still lag behind.

The figures come weeks after the Bank of England moved to put curbs on riskier mortgage lending with a new cap on home loans and stronger checks to make sure borrowers can afford repayments.

William Zimmern, senior economist at PwC, said: "The data shows there is still strong momentum in house prices in London and the South East. But we expect the pace of growth to slow in the second half of the year and into 2015.

"However, both mortgage lenders and borrowers should bear in mind the possibility of a sharper correction, especially in London."

Campbell Robb, chief executive of housing charity Shelter, said: "Once again these figures show that house prices are spinning out of control, putting a stable home even further out of reach for ordinary families.

"Instead, scores of people are either stuck in their childhood bedrooms or forced to bring up children in unstable and expensive rented homes, however hard they work or save.

"With interest rates at historic lows, it is worrying that taking on huge mortgages is becoming a tempting option, and something that could have disastrous repercussions in the future.

"The Government has to start meeting people halfway by committing to building the homes that they can afford."

The people who affect house prices
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London house prices rose by a record 20.1%

They have the power to push a price higher, depending on how many other people are in the running for a home and how liberal they want to be with the truth to the buyers. In some cases, they can also do more harm than good by initially overvaluing a property. The worst case scenario is the home eventually sells for less than it would have done had it been priced realistically in the first place.

Sometimes a quick-moving solicitor can be the difference between getting the home at the price you want and getting into a bidding war or missing out entirely. If the buyer needs a quick sale, they're more likely to do a deal with someone who has a flexible solicitor who can push through the sale so it suits them.

Research by Halifax concluded that anti-social neighbours could take £31,000 off the price of an average home. If you’re selling, you should declare any problems you’ve had on a Seller’s Property Information Form, otherwise you could face a claim later on.

While an increase in Council Tax might not be too much of a deterrent to a potential buyer, plans to grant permission for new homes, a mobile phone mast or wind turbines could knock an asking price down. If you're a buyer, the local council should have details of any future planning applications and you can search them for a small fee.

A lot of traffic in an area obviously has an effect on air quality. Since 1997 each local authority in the UK has carried out studies of the air quality in its area. If an area falls below a national benchmark for air quality, it has to be declared an Air Quality Management Area (AQMA). Some residents of the Llandaff area of Cardiff expressed concern that it had become an AQMA due to an increase in traffic in the area. Whether this becomes a widespread issue remains to be seen.

Mortgage availability is a key driver of property prices. If no-one can take out a mortgage, then prices will stall and eventually fall. We've seen this happen in parts of the UK in recent years, as lenders tightened up their criteria following the credit crunch. Conversely, good mortgage availability will mean more people are competing for properties - to a seller's advantage if their home is desirable.

An outstanding local school can add around 8% to the value of a home, according to the Royal Institution of Chartered Surveyors. On the flipside, a not so good Ofsted report can take off a similar amount. If you’re concerned about a school’s performance, one way to get involved is to become a governor.

Initiatives such as the Help To Buy scheme have been credited with pushing house prices up. A buoyant economy with strong employment gives people the confidence to buy and leads to an upward shift in house prices, while rises in unemployment have the reverse effect. Planning restrictions, at both a national and local government level, affect the number of homes in a particular area.


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