The latest official data from the Land Registry shows that prices rose to a new record of £543,517 in July.
The increase means that the capital’s homeowners have seen the value of their bricks and mortar grow by more than £45,000 in a year on average, and over £6,000 in just one month.
Across London the biggest rise was in Harrow where prices increased by 14 per cent to an average of £546,597.
Nationally house prices jumped 15.5 per cent in the year to July, the highest rise since 2003. The leap is explained by prices tumbling in the same period last year after the end of the stamp duty holiday.
Commentators said London’s jump in annual growth reflected high demand and the ongoing lack of supply but pointed out the July data records transactions agreed back in April, before rising inflation and the cost of living crisis began squeezing households.
There have been early signs of the cost of living crisis filtering through to the property market, as house price growth in the UK cooled slightly in August, according to Nationwide’s house price index. Rightmove also recorded the first fall in average asking prices of the year in London, with prices dropping by £23,000.
However house price growth in the UK remains in double-digits, with the average home costing £50,000 more than two years ago.
Jeremy Leaf, north London estate agent, said while the numbers were strong it was too early for the Land Registry data to be reflecting the change in activity on the ground in the past few months.
He added: “The balance of power is shifting more towards the buyer but what these numbers do show is that there is still plenty of underlying strength which will mean a serious price correction is less likely. A gentle softening has been happening and is likely to continue to do so over the next few months.”
Gareth Lewis, commercial director of property lender MT Finance, said the price growth was ‘unsustainable’ because of the impact of affordability and what buyers will be able to pay for a mortgage. “House prices tend to rise where there is demand combined with lack of stock and these figures illustrate that.
“What we are seeing now are those pressure points of rising interest rates and the cost of living which haven’t yet been factored into transactional flow. Purchases which completed in July would have been agreed in April where many would have been blissfully unaware as to what was to come.”
Tom Bill, Head of UK Residential Research at Knight Frank, said: “The large jump in house prices recorded in July tells us more about how a stamp duty holiday can alter the course of the housing market than where prices are headed next.
“The new government’s energy support package combined with record low unemployment will help oil the wheels of the property market but rising mortgage rates will ultimately curb the double-digit price growth seen over the last two years although we don’t expect prices to fall.
“The government is effectively in pre-election mode and further tax cuts will benefit the housing market in the short-term.”