London's red-hot property market is finally beginning to cool

London house prices jumped 16% in a year but prices in prime locations are starting to fall.

by Elizabeth Anderson
Last Updated: 17 Nov 2014

The average house price in London rose 15.6% to £545,643 in the year to June but there are signs the market is beginning to level out.

House prices across the UK rose 0.7% in the month of June, below the 0.8% recorded in June a year ago.

And in the City of Westminster and the City of London, two of the capital's prime areas, house prices have dropped over the last 12 months.

'In four of the top five most expensive London boroughs, average house prices have dipped below their respective peak levels,' according to a report by LSL Property Services.

The consultancy said that Londoners are migrating out of the city in search of more affordable homes in the surrounding regions.

Houses in the City of Westminster, London's second most expensive borough, fell 0.2% to £1,310,189 in May, down from £1,312,181 a year ago.

Homes in the City of London fell to £819,920 in May, down 0.3% in a year and down 8.2% from April 2014, when prices were £892,990.

The borough of Lambeth saw the biggest jump in property values, with prices up 40.7% over the year from £421,257 to £592,889 in May.

Meanwhile Kensington and Chelsea remains the most expensive area in London, with prices of £1,939,654, up 27.6% in a year.

Across the UK, the average house price in England & Wales rose to a new record level of £268,637 in June, up £23,443, or 9.6%, from last year.

But housing transactions in England & Wales are beginning to slow. In June, 73,750 properties changed hands, up 10.3% compared to June 2013. This was the lowest increase in a single month in the last twelve months.

LSL Property Services said this may be an early result of tighter lending rules which have recently been announced. The UK Central Bank has introduced tools to curb how much people can borrow. From October, borrowers can only take out loans at 4.5 times their income, and must pass a test to make sure they can afford a 3% rise in interest rates over the next five years.

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