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Asking house prices in London have risen by 80,000 since January



Rightmove's figures suggest annual rate of increase is approaching the level last seen in October 2007
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The average asking price for a London house has jumped 80,000 since the beginning of the year, according to figures from Righmove. Photograph: Alex Segre/Rex Features

The average asking price of a property in London has risen by 80,000 since the start of 2014, as sellers try to cash in on continuing demand from buyers, according to the property website Rightmove.

The listing site said asking prices in the capital hit an average of 592,763 in May, 3.3% up on April's figure and 16.3% higher than in May 2013.

Across England and Wales new sellers are asking 8.9% more than a year ago, at an average of 272,003. The annual rate is creeping closer to the 10.4% seen in October 2007 while a month-on-month rise of 3.6%, or 9,409, was the highest ever seen in May.

The figures follow comments over the weekend by the Bank of England governor, Mark Carney, that the property market poses a risk to economic recovery.

He warned of "deep, deep structural problems" in the UK market, and said the main problem was that not enough new homes were being built.

The strength of price rises in the capital has been driving fears of a bubble and calls for the Bank to step in to calm prices.

Rightmove said demand and asking prices were now rising across England and Wales, but the increases in London were distorting the national picture.

Asking prices in Greater London have risen by 4,405 a week in 2014, compared with 1,521 for the rest of the country.

An increase in new sellers earlier in the year was reversed in May as the number of homes being newly put up for sale fell 1% compared with April. It was thought to be the result of the timing of bank holidays.

Rightmove's director, Miles Shipside, said:"London prices traditionally pick up earlier than the rest of the country, and while it appears to be slowly dragging other regions along in its wake, the difference is still very marked, particularly when the percentage increases are turned into hard cash comparisons.

"Indeed, outside London and its commuter belt, demand may be better balanced with supply by the more stringent checks and affordability tests under the mortgage market review (MMR) that became mandatory less than a month ago.

According to Rightmove, 10 out of 32 boroughs in London recorded annual asking price rises of more than 20%, with a 43% increase in Tower Hamlets, east London, driven by cash buyers and investors in Canary Wharf and neighbouring areas.

Ben Butler, sales manager of estate agents Morgan Randall in Canary Wharf, said parts of Tower Hamlets were "investor territory".

"Around 65% of the properties we are selling are going to cash buyers, and we haven't sold a property for under asking price since around August 2013," he added. "As an example, one property sold in December 2013 for 425,000 and in March of this year an identical property in the same building sold for 575,000 a 150,000 difference in just a few months."

However, in some parts of London estate agents say prices are starting to plateau as affordability restraints kick in. Typically first-time buyers in London are taking on mortgages of 3.8 times their income to buy homes, versus 3.4 times nationally.

Ed Mead of central London estate agent Douglas & Gordon said buyers were also starting to question high prices.

"Buyers, who after all make the market, have sort of called time on some prices being asked. They're not paying what's being asked," he said.

"Part of the reason for price rises is lack of stock which created something of a frenzy among agents looking for listings and pushing prices beyond what buyers will pay. When this happens there's usually a three month hiatus before sellers realise what's happening and adjust and that's what's happening now."

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