London prices soar again
Prices in the capital are up 18% year-on-year in Q1 2014, while UK property prices have seen an 11.1% increase annually, taking the average to £186,512.
UK House prices increased by 0.7% in May alone.
Jeremy Duncombe, director of Legal and General Mortgage Club, added: “Whilst continued house price rises are a sign that confidence has returned to the market, these sharp increases, particularly in London and the South East, are detrimental to the overall recovery.
“London is becoming unaffordable for more and more people, while other areas of the UK are lagging behind.
“This two-speed market is likely to divide the UK and threaten the stability of the recovery. It is therefore important that any decisions on how to cool the market take into account these regional differences, and aren’t based solely on what is happening in the capital.”
Despite such rapid growth mortgage approvals in April stood 17% below January levels.
Robert Gardner, Nationwide chief economist, said: “It is too early to say whether nationally this is indicative of a cooling trend in the wider market. The slowdown may partly be the result of the introduction of Mortgage Market Review (MMR) measures, which may take a few months to bed down.
“The underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer.
“However, with mortgage rates close to all-time lows and labour market conditions continuing to improve, underlying demand for homes is likely to remain strong.”
First-time buyers accounted for 48% of house purchase approval in March compared to the long run average of 38%.
Although first-time buyers are playing a role in driving the housing recovery, Help to Buy is unlikely to be the main factor, Gardner added.
In London Help to Buy accounted for around 4% of mortgage completions, with a larger share of transactions taking place in the North where house price growth is less marked.
Gardner said: “The modest numbers involved so far suggest that Help to Buy is unlikely to be the main factor behind the recent pickup in the wider housing market.
“For example, 12,853 Help to Buy mortgages were completed in Q1 (6,327 under the mortgage guarantee scheme and 6,526 under the shared equity scheme), equivalent to around 9% of total mortgage completions over the period.
“Low mortgage rates and growing buyer confidence on the back of improving labour market conditions and the brighter economic outlook are probably playing a much greater role in stimulating buyer demand.”