Overseas demand boosts house prices

A remarkable spring rise in the London property market has pushed prices up almost five per cent since the darkest days of the financial crisis.

Demand from overseas buyers following the pound's slump, record low interest rates and stirrings of confidence among first-time buyers all helped reverse the decline in values, according to a survey today.

Nationwide said the average price in the capital bounced 4.8 per cent from April to June to an average of £256,496, putting the annual rate of fall at only 10.2 per cent compared with 18.2 per cent in the winter. It was the first time prices have risen quarter on quarter since autumn 2007 and confirms the increasingly excitable chatter among agents that the market has turned.

Prices in areas of central and west London prized by foreign buyers are said to have increased by as much as 10 per cent.

West London agency Bective Leslie Marsh said a one-bed flat in Ladbroke Grove priced at £550,000 late last year went this month for £625,000.

It also had a duplex apartment in Kildare Gardens near Westbourne Grove that attracted bids of £800,000 in January but sold for £1 million.

Bob Crowley, manager of the firm's Notting Hill branch, said: "We have had calls from developers who this time last year bowed out of the market and are now back in the game."

Agents said the Bank of England's decision in March to reduce interest rates to a low of 0.5 per cent seemed to act as a spur to first-time buyers.

In some boroughs prices are barely lower than a year ago, according to Nationwide, although it warned against reading too much into one set of figures.

The building society's chief economist, Martin Gahbauer, said: "Since prices are relatively high in relation to earnings, they remain vulnerable to any renewed shifts in market sentiment."