London's house prices jumped up 9.3 per cent year-on-year in September, with prices in England and Wales up 1.5 per cent since August, according to the Land Registry's house price index. The release follows Hometrack's October data earlier today, which documented that national prices increased by 0.5 per cent, whilst London rose by 0.8 per cent, owing to rising demand but a fall in supply.
The average house price in England and Wales is now £167,063 and £393,462 in London, says the Land Registry. The rise suggests that house prices are becoming more solid, fuelling talk of a housing bubble.
Research by Deutsche Bank suggests that chronic undersupply in the London housing market will continue to push up prices.
The overall annual change of 3.4 per cent (from September 2012) was negated by falling prices in Wales (down 1.4 per cent) with no other area except for London and the South East (up 4.4 per cent) seeing growth above 4.0 per cent.
But, as Howard Archer of IHS Economics points out, more regions are demonstrating firming prices as the North East (+2.7 per cent), East (+1.6 per cent) and Yorkshire and Humberside (+1.0 per cent) see solid month-on-month gains.
Archer comments, highlighting that improvements were being seen before the October introduction of Help to Buy, "it is evident that activity is being supported by markedly improved consumer confidence, elevated employment and extended low mortgage interest rates and is being fuelled by the Funding for Lending Scheme and the first stage of the Help to Buy initiative. On top of this, the Bank of England has indicated that interest rates are unlikely to rise before mid-2016, which seems likely to give many people greater confidence in their ability to purchase a house."
House prices are still significantly below their peak 2007 levels, but limited supply is pushing up prices in London and areas of the South East, and increasing buyer interest because of Help to Buy is fuelling an improving market. Archer stresses that it is "vitally important for economic stability and longer-term growth prospects that new housing price bubble does not emerge."