House prices in London shot up 9.4pc in the year to September, official figures showed today, pushing the average UK property value up 3.8pc.
The figures, released by the Office for National Statistics, add more weight to warnings of a property bubble developing in the capital.
Prices in London have been steadily rising, driven in part by foreign investment. Luxury residential property prices in London rose 7pc in the year to September, placing the capital among the top ten global cities for prime house price growth, according to the Knight Frank Prime Global Cities Index.
The rises in London have helped to boost prices across the UK, which are continuing to grow at a steady pace. Across the UK generally, house prices rose 3.8pc – the highest year-on-year change since October 2010, according to the ONS September House Price Index. It said the average house in England and Wales cost £245,000 in September.
Excluding London and the South East, which saw 4pc growth, UK house prices increased 1.4pc over the 12 months. Only Scotland and Northern Ireland saw house price falls of 1.1pc and 1.5pc respectively.
Mortgage lending for house purchases was up in 20pc in September compared with the same time last year, according to the Council for Mortgage Lenders. This is down 14pc when compared to August. On a quarterly basis, mortgage lending for house purchases between July and September was the highest recorded since 2007.
Many experts are concerned about a house price bubble forming in the UK thanks to measures to increase lending, particularly to first-time buyers, such as the Government’s Funding for Lending and Help to Buy schemes.
But Nicholas Ayre, managing director of homebuying agency Home Fusion, said the figures do not point to a house-price bubble.
He said: “House prices and the number of transactions remain well off their pre-crisis peak: we are not seeing an all-consuming bubble with prices running out of control and buyers snapping up anything at any price.
“The London market is more frenetic than other parts of the country with sealed bids and gazumping making an unwelcome return, but this is particular to the capital. Elsewhere, prices are either rising steadily, remaining flat or even falling.”
Prices paid by first-time buyers in September were 5.3pc higher on average than at the same time last year, according to the ONS. The average price paid for a house by a first-time buyer was £184,000. The CML said first-time buyers took out 23,600 loans in September, a 34pc increase compared to September 2012.