London only region to see house price rises above inflation

London is the only region in the country where house prices have risen ahead of the rate of inflation since 2007, according to a new study.

House asking prices nationwide have hit a new record high, but are still some way behind their 2007 peak once inflation is factored in, the Rightmove house price index shows.

The price of homes being listed on the market increased by one per cent month-on-month in June to hit an average of £246,235.

The rate of new listings reached its highest point for almost two years, with 30,000 new sellers a week putting their properties on the market in the three weeks leading up to the Diamond Jubilee weekend. An increase in seller competition could slow down asking price increases, the study suggested.

House prices could also be weighed down by Euro 2012 and the Olympic Games, as buyers choose to watch sport rather than invest in property, while elections in Greece and the eurozone problems could also slow increases.

It is the third consecutive month that asking prices have hit record highs, but the figures are not as encouraging once inflation is taking into account.

Sellers’ prices are up by two per cent on August 2007, before the run on Northern Rock chilled the economy, but have dropped by 13 per cent in real terms in England and Wales after retail prices index (RPI) inflation is factored in.

London has bucked the trend by registering an inflation-busting rise in asking prices, standing at £477,440, meaning prices have gone up by three per cent after inflation since August 2007.

“The better properties in the better areas remain in short supply, giving sellers of sought-after stock, and their agents, the confidence to come to market at a higher price,” said Miles Shipside, the director of Rightmove.

“The right property within commuting or holiday bolt-hole distance of the capital seems to be an attractive each-way bet with the potential to be both recession-proof and offer good odds to keep pace with, or even outstrip, inflation.”

Most sellers are still worse off than they would have been by selling their properties five years ago, Shipside said.

Buyers have little cause to celebrate either, because the reduction in house prices would have only been good news had their wages kept up with inflation, he added.

“The reality is wage freezes, rising costs of living, and continuing tight mortgage funding have squeezed affordability for many buyers,” said Shipside.