London house prices rocket by almost £50,000 in one year

On the market: But houses are in short supply
12 April 2012

House values in many areas are rising by more than twice the average national wage.

The relentless market boom means homeowners are earning far more on their property than they do by going out to work.

In Greater London, the price of the average home increased by £48,000 to £313,000 in the year to the end of June.

The record rise is over a third more than the region's average salary of £31,000, and more than double the national average wage of £23,000.

It is the first time the capital's average property price has broken through the £300,000 barrier.

Northern Ireland is expected to record the biggest proportionate rise at 23 per cent, from £197,086 to £242,416, yielding a £45,000 benefit, almost three times the typical salary in the province of £17,000.

Prices are expected to increase by 10 per cent in the South East this year, earning many homeowners considerably more than the average salary of £25,221. The figures were released by Halifax, which forecast a six per cent average increase this year, compared to the four per cent it previously predicted.

It means the average price nationally would jump by more than £11,000, from £187,076 to £198,301.

Some parts of the country are expected to experience far more modest rises, with the North generally-lagging well behind the South. Halifax expects prices will grow by only 3 per cent in Yorkshire and the Humber, while the North West, East Midlands and West Midlands will record 2 per cent.

The price divide between north and south is expected to widen by £14,500 this year, to £105,000.

Scotland and Yorkshire and the Humber are now the only regions of the country where the average home still costs less than £150,000, with prices in these regions standing at £140,262 and £149,051 respectively.

The continued boom in some areas, in the face of concerted attempts to slow the market with interest rate rises, is due to an acute shortage of properties, says the Halifax.

It suggests that buyers are still eager to borrow vast amounts to get a foot on the property ladder, despite warnings that there could be a collapse.

The lender pointed out that the rises in the South would mean heavier tax burdens for buyers and existing owners in terms of stamp duty and inheritance levies.

The average property in London now costs more than the new £300,000 threshold at which inheritance tax kicks in.

And someone in the South East buying an average-priced property would now have to pay stamp duty of 3 per cent of the value rather than 1 per cent.

It criticised the Government for failing to increase the thresholds for both taxes in line with house price inflation.

If this had happened, it said, the inheritance tax threshold would be £490,000, while the threshold at which 3 per cent stamp kicked in would be £720,000, not £250,000. Buyers would not have to pay the top 4 per cent rate until they bought a home worth £1.4million, rather than the current £500,000.

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