House prices surge past 2007 peak
The average home purchased in June 2014 sold for 11.8% more year-on-year.
The growth was driven by London, where prices increased by almost 26% in Q2 compared to the same period the year before, surpassing £400,000 for the first time.
Prices in the capital are now 30% above 2007 highs, standing at almost double the level of the rest of the UK.
Despite the figures, the industry consensus is that house price growth is slowing down.
Robert Gardner, Nationwide’s chief economist, said: “The annual pace of growth in the capital will probably start to slow in the quarters ahead, given the high base for comparison from Q3 2013 onwards and given anecdotal evidence from surveyors and estate agents that activity may be starting to moderate.”
And Nicholas Ayre, managing director of home buying agency Home Fusion, said: “Despite house prices recording their fourteenth successive monthly increase in June, the tide is most definitely turning.
“Buyers are thinking twice about making such a major investment, worried about overpaying. Another growing concern is affordability, particularly with the looming threat of an interest rate rise, which is now looking increasingly likely.”
Paul Smith, chief executive officer of haart, also felt the market would correct itself.
He said: “Bubbles burst and London house prices – while completely unaffordable to many – are not about to collapse. That said, the market is correcting as wages are no way keeping up with property rises in the capital.
“The Bank of England’s monetary policy committee has already put its oar in by introducing stress tests to mortgages and this will have an effect on the market in time.
“The market will find its own level without any interference from government or policy makers. They should leave well alone.”
Stuart Law, chief executive officer at Assetz, said that buy-to-let investors should focus on properties outside London, especially with HS3, the high-speed rail link between Manchester and Leeds.
“The recent proposals for HS3, which will help to create a Northern super-power to rival the Capital, means investors looking North will achieve decent rents from employees gravitating to the regions,” he said.
“Property price recovery in now sustained across the UK with annual increases for all regions and the ‘ripple effect’ is well underway.
“The sensible and measured tools announced in last week’s Financial Stability Report should keep lending sensible which is key to a healthy market and certainly not encouraging a bubble.”
According to Nationwide’s Robert Gardner the decision to limit lending at 4.5 times borrowers’ income to no more than 15% of new loans will protect consumers, by limiting the risk of house prices detaching from earnings.