London house prices rise by a quarter in just a year

British houses

The average house price in London has topped £400,000 for the first time, with growth in the three months to June of nearly 26% year-on-year, according to Nationwide.

The price of a London home hit £400,404 by the end of the second quarter of 2014 - more than double the UK average house price of £186,544 and 30% higher than the capital's previous peak of £280,000 in 2007.

Nationally, all regions saw a rise in prices, with the average UK house price of £186,544 for the three months to June representing an increase of 11.5% compared to the same period a year ago, and a jump of 2.9% on the first three months of 2014.

Other than London and the South East, the best preforming regions during the period were the South West, with the average house price up 9.8% annually to £207,420, and East Anglia, which saw a 9.5% increase and took the average price to £188,960.

Meanwhile, prices in Scotland - the worst performing region – rose by just 5.4% over the past 12 months, with the average price by the end of the second quarter standing at £141,872.

Yorkshire and Humberside performed slightly better with an average price increase of 7%, which took the average house price to £142,661.

Separate monthly figures released by Nationwide also revealed a rise in prices across the UK. In the month of June alone, the average UK house price stood at £188,903 – a rise of 1% in June compared to May and a 11.8% since June 2013.

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Robert Gardner, chief economist at Nationwide, said he expects the UK property market to steady in coming months but wouldn't be much affected by the announcement of new mortgage rules from the Bank of England.

Last week it said it would cap mortgage lending to 4.5 times income for all but 15% of new home loans would have limited impact in the short term.

Gardener said: "The Financial Policy Committee's decision to limit the proportion of lending are unlikely to have a significant impact on housing transactions or the pace of price growth in the near term.

"Most majority lenders are already using a stress test in their affordability calculation that is broadly consistent with the new stress test."

Nicholas Ayre, managing director Home Fusion, supported the view that the market should start to moderate in coming months.

He said: "Despite house prices recording their 14th successive monthly increase in June, the tide is most definitely turning. Buyers are thinking twice about making such a major investment, worried about overpaying.

"Another growing concern is affordability, particularly with the looming threat of an interest rate rise, which is now looking increasingly likely."