Business

House price gap between London and the UK 'widest ever'

London house
Image caption On average, a house in London now costs £150,000 more than elsewhere

The gap between house prices in London and the rest of the UK is the "widest it's ever been", the UK's third largest mortgage lender has said.

The Nationwide building society said prices in London were now 5% above their previous peak in 2007.

But prices across the UK as a whole are 9% lower than they were six years ago.

Overall the Nationwide said house prices across the UK have risen by 1.9% in the past 12 months, the fastest pace since September 2010.

However, the national figure disguises huge variations in different regions of the country.

On average, anyone wanting to buy a house in London would need £150,615 extra, compared with buying in the rest of the country.

"For prices in the capital to be 5% above their 2007 peak is nothing short of incredible," said Jonathan Hopper of the property firm Garrington.

"The London property market is an extraordinary microcosm. It has effectively broken free of the rest of the UK and is operating in its own stratosphere," he said.

East-West split?

But the picture elsewhere is very different.

The region where prices are falling fastest is now Northern Ireland. House prices there have fallen by 2.1% in the past year, according to the Nationwide. Since prices peaked in 2007, they have dropped by 52%.

In Scotland, prices have fallen by 1.2% in the past year.

Even within England, there is huge variation between different cities. In Newcastle-on-Tyne, prices have risen by 11% in the past 12 months, the highest rise of any UK city.

But in Liverpool, prices fell by 8%, suggesting a possible east-west split, as well as a north-south divide.

However, prices in the south of England and East Anglia, are relatively close to their 2007 peak, the Nationwide said.

Lack of supply

UK house prices rose by 0.3% in June, the Nationwide said, pushing the price of an average property up to £168,941.

The Nationwide said the market had been helped by the government's Funding For Lending Scheme, which is designed to boost the amount of money that banks and building societies can lend out. London house price gap 'widest ever'

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Robert Gardner, Nationwide's chief economist, said: "Demand for homes has been supported by further modest gains in employment, as well as an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending Scheme."

But he also voiced concern about the rate at which homes were being built.

"There are few signs that the supply of housing is improving significantly. Indeed, construction data point to a further decline in building activity in recent quarters from already depressed levels," he said.

The most recent figures from the Halifax suggested prices are rising at a faster rate than that recorded by the Nationwide. Last month, the Halifax said prices had risen by 2.6% in the past year.

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