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House prices in London rise again but agents warn that crash ‘now inevitable’

The average cost of a home in the capital went up by 8.33 per cent in the year to August (PA Archive)
The average cost of a home in the capital went up by 8.33 per cent in the year to August (PA Archive)

London house prices have hit a new all-time high of £552,755 as buyers scramble to secure affordable mortgage deals before a feared sharp rise in interest rates.

The average cost of a home in the capital went up by 8.33 per cent in the year to August according to the latest figures from the Land Registry.

Matthew Thompson, head of sales at agents Chestertons, said he had seen a rise in demand last month.

“The expectation that London’s property prices could see an adjustment has led to an uplift in buyer demand across the capital last month,” he said.

“Compared to August, there were 17 per cent more buyer enquiries in September and 18 per cent more viewings.

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“We are also encountering an increasing number of house hunters who want to secure a property as soon as possible and take out a fixed rate mortgage.

“This has contributed to September’s property market remaining busy and competitive.

“As the cost of living crisis is looming, some buyers are compromising on their priorities in order to secure a property under their initial budget.”

Banks increased mortgages rates after last month’s mini-budget from the then chancellor Kwasi Kwarteng sparked market turmoil with a spike in the cost of borrowing.

Despite new Chancellor Jeremy Hunt ripping up the economic plan this week, rates continued to rise with the average two-year fixed mortgage increasing from 4.74 per cent to 6.47 per cent on Monday.

Joe Garner, managing director at London-based property developer, NewPlace said: “A house price crash is now a fait accompli. The only unknown is how hard and how fast the crash is.

“Only a few weeks ago, I was fairly confident the crash would be minimal, but then Liz Truss and Kwasi Kwarteng blew the mortgage, property and bond markets apart.

“We will now be lucky if we manage to get away with a 10 per cent drop in prices. With inflation back in double digits, confidence among buyers has been shattered.”

Across the UK, the average house price was £296,000 in August — £36,000 higher than a year earlier. They increased by 13.6 per cent over the year to August, slowing down from 16.0 per cent in July.

Average house prices increased over the year to £316,000 (14.3 per cent annual growth) in England, to £220,000 in Wales (14.6 per cent), to £195,000 in Scotland (9.7 per cent) and to £169,000 in Northern Ireland (9.6 per cent).