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London house prices are at their strongest in six years as workers return to office

Property prices in London have risen at their fastest pace in six years as workers flocked back to offices in the capital.

House prices in London are up 8.8 per cent year-on-year, with the average home in the city now standing at £554,718, almost double the national average of £294,260, according to the Halifax Home Price Index.

The bank said that was the highest annual growth rate since 2016.

Ian McKenzie, of the Guild of Property Professionals, a trade body for property agents, said the London property market is benefiting from the reversal of the pandemic trend towards remote working.

“London’s highest annual house price inflation in six years reflects a sense of going back to business and reverses the years that staff have moved away from cities during the pandemic,” he said.

Andrew Montlake of mortgage broker Coreco said prices could continue to rise in the capital. “There’s still life in London,” he said. “House prices in the capital, the engine room of the UK economy, could bizarrely benefit from a recession as regions go into reverse.”

Wales remained the fastest growing part of the UK, where prices rose 16.1 per cent year-on-year.

Overall, UK national house prices rose a modest 0.4 percent in August compared to the previous month. However, the annual rate fell to 11.5 percent from 11.8 percent. But that growth is likely to slow unless the government urgently supports budgets, experts have warned.
 
Analysts said prices would fall in the coming months unless new Prime Minister Liz Truss delivers on her promises to give households immediate support in the form of tax breaks and energy price freezes.
 

Nicky Stevenson of national estate agent group Fine & Country said: “Disposable incomes are being eroded by inflation, leading to a very gradual slowdown in annual price growth. A package of tax cuts and energy price freezes could increase buyer affordability, reverse current market weakness and give new impetus to the boom.”

A major budget bills announcement is expected on Thursday. Ms Truss is expected to freeze household energy bills to around £2,500 to help families weather rising living costs this winter.

Economists have predicted a freeze could help keep inflation, which hit a 40-year high of 10.1 percent in July, from spiraling out of control. This in turn could slow expected rate hikes by the Bank of England.
 

The key interest rate is currently at 1.75 percent after having been raised six times in a row since December. At the same time, mortgage rates have risen, which has pushed up household bills across the country.

Mr Montlake said: “Higher mortgage rates and the immense pressure on household finances will almost certainly dampen demand in the coming months.”

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