GO
Loading...

UK house prices pass pre-crisis peak

U.K. house prices climbed in June to surpass highs reached in 2007, as the average price of a property in London reached £400,000 ($686,190) for the first time, a new survey showed.

London property prices are more than twice as high as the rest of the country after the fourteenth successive monthly increase, according to the survey by U.K lender Nationwide.

Read MoreUK mortgage approvals fall in sign of cooling

Skyscrapers  stand on the horizon beyond rows of residential houses in London, U.K.
Bloomberg via Getty Images
Skyscrapers stand on the horizon beyond rows of residential houses in London, U.K.

House prices were up 1 percent in June from May, bringing the annual pace of price growth to 11.8 percent, up from 11.1 the previous month.

Homebuilder Persimmon chief executive, Jeff Fairburn, told CNBC the situation is clearly very different in London compared to the rest of the U.K, where the group operates.

"Actually the real price inflation on our houses for sale is fairly muted and we would estimate that so far this year we have only seen about 1 percent increase. ONS statistics indicate around 2 percent for the last 2 months, it is at a very manageable level outside of London," Fairburn said.

Read MoreWhat London can learn from Hong Kong's property market

Nationwide chief economist, Robert Gardner, said prices in the capital are now 30 percent above their 2007 peak, compared to less than 1 percent above their pre-crisis peak in the rest of the U.K.

Gardner also said the Bank of England's (BoE) new restrictions, such as a lending cap of 4.5 times a borrowers' income, brought in to try and cool the housing market are unlikely to have a "significant impact" in the near term.

"However, these policy measures, along with previous actions, such as the introduction of Mortgage Market Review (MMR) measures, should help to limit the risk of house prices becoming detached from earnings without de-railing the recovery in the wider housing market," he said.

Expectations of an interest rate rise from the BoE are also likely to relax housing market activity in the coming months, Gardner said.

Read MoreCapital gains: London's house price dilemma

"As investors have become more confident that the bank rate will start to rise gradually from late 2014 or early 2015, so longer term interest rates have started to increase. If this is sustained, it is likely to feed through to mortgage rates, which would also help to prevent buyer demand rising too strongly," he said.

Follow us on Twitter: @CNBCWorld

Contact Real Estate

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More
  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

Latest Special Reports

  • Financial advisors stress that now is the time for investors to get serious about year-end financial planning checkup.

  • Is an active twist on passive investing the right portfolio move? An inside look at the rise of ETF strategists.

  • The nexus of technology -- cloud, social, mobile and data -- are transforming user behaviors and creating new businesses.