The average cost of a home in the capital hit £520,000, up 5.1 per cent in a year and 0.2 per cent in the month, according to latest Land Registry data.
The rise was the slowest for any region in the country and only half the national annual rate of 10 per cent. The average cost of a home across the UK stood at £270,700.
The property markets of the regions have consistently outpaced those of the capital throughout the pandemic, in part because of the race for space during lockdowns but also because the stamp duty had a much bigger impact on buyer demand outside London.
However, agents in London say that interest has picked up in the New Year with buyer registrations double last year’s level.
Within the capital the biggest increases were seen in Camden (17.9 per cent to £961,390) Islington (15.3 per cent to £771,374), Richmond, and Enfield (both 9.8 per cent to £758,967 and £444,336 respectively)
Jamie Durham, economist at consultants PwC UK, said: “The capital once again saw the slowest price growth of all regions, with prices up 5.1 per cent compared to the year before.
“This is in part due to higher prices in London, with the average home now costing nearly £520,000, which limits affordability and so price growth.
“While there remains considerable uncertainty in the outlook for the market, we do expect prices to continue to rise in 2022 but at a slower rate than seen in 2021 as conditions start to normalise.
“Going into 2022, the most significant risk to the outlook is the ongoing pressure on the cost of living. Figures also published this morning show inflation in December surged to the highest rate in 30 years. This may impact consumer confidence, and limit willingness to make major financial decisions like buying a home.
Phillip Stevens, director of Richmond estate agency Antony Roberts, says: ’It was business as usual in November as prices rose again following October’s dip which came about following the end of the stamp duty holiday. There is plenty of evidence that buyer demand remains strong, especially for houses, and with relatively little stock available it is a house seller's market.
"The interest rate rise does not appear to have dented buyers’ confidence thus far, nor their ability to purchase property, but with inflation at a 30-year high that could change as it may well be the first hike of many.
“Those wanting to make their move will be keen to do so sooner rather than later but whether they can will depend on what stock launches onto the market this spring.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Despite the global pandemic, the housing market was able to thrive last year and there are still those who have not yet made their purchase.
“Squeezed affordability would be an issue, preventing first-time buyers in particular from getting on the ladder, but the Bank will be mindful that as we come out of a pandemic, a succession of significant rate increases could be extremely damaging to the wider economy.
“Low mortgage rates have been one of the contributing factors to the housing boom and although some lenders are tweaking mortgage rates upwards on the back of higher money market rates, pricing remains competitive."