House prices in the capital bounce back to 2008 levels

London house prices have recovered to almost the levels they were at a year ago after rising by 3.8% over the last three months.

Nationwide Building Society, which today reported a 0.9% rise in prices across the country in September, said that London prices are now down only 1.9% on a year ago. In some boroughs prices are now actually up on a 12 month basis with Hackney leading the way with a 4% annual rise.

Martin Gahbauer, chief economist at Nationwide, said: "New buyer interest appears to have increased significantly in recent months but the supply of property for sale continues to be very limited, thus helping to support prices in the capital."

Looking at the national picture, Gahbauer said: "The further increase in house prices is very much consistent with improvements in a broad range of economic and financial indicators over the last few months, all of which suggest that the most intense phase of the recession and financial crisis has probably passed.

"However, given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months."

David Smith, senior partner at property consultancy Carter Jonas, agreed: "For anyone considering selling their home, now is the time to do so. It is a window of opportunity that may soon shut.

Rising unemployment and interest rates will bring more property onto the market as people struggle to meet their repayments, which will apply downward pressure on prices."

In London other boroughs where prices are now up on a year ago are Tower Hamlets (3%) and Hammersmith & Fulham (2%).

But many boroughs are still showing double digit falls in prices with Merton at the bottom of the pack with a 15% decline.

Today's data also reveals that almost any Londoner who has stayed in the same house for the last 10 years will have seen it at least double in value.

Londoners are also the most confident people in the country about house prices, according to the Nationwide, with 27% saying prices will rise over the next six months.

The national 0.9% rise in house prices is the fifth consecutive monthly increase.