Real Estate

Average London house double UK average at $750,000


London property prices soared in January to almost double the national average, as the city's buoyant housing market continues to inflate.

Real estate in the U.K.'s capital rose 13.2 percent in January compared with a year earlier, dwarfing the 6.8 jump seen across Britain as a whole.

The average house price in London hit a staggering £458,000 ($755,837), almost double the U.K average of £254,000, and over three times as much as the average property in England.

House prices in the U.K. have been buoyed by an improving economic picture, a lack of housing stock and a government mortgage scheme aimed to boost construction and help first-time buyers. Analysts have been split on whether the price increases signal a housing bubble in the capital.

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But a picture is emerging of a "two tiered" London property market according to Tom Bill, associate in residential research at Knight Frank.

"You have a London market that is two tiered, two separate markets where one is growing at a faster rate and the other is slowing," Bill told CNBC in a phone interview.

Real estate in so-called "prime central London" which includes areas such as Chelsea and Islington, has seen prices cool from an annual rise of 7.5 percent in February 2014, compared with 11.6 percent in February 2012, according to data from Knight Frank.

However, other areas just outside the center such as Canary Wharf and Fulham have seen property prices rise 11 percent in the year to February 2014, from an annual growth rate of 4.2 percent the same time last year.

(Read more: 'Ghost gazumping' haunts London housing market)

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Other regions in Britain showed a mixed picture. The South East clocked annual gains of 7.1 percent in January 2014, while the North East saw tepid growth of 0.6 percent, showing the housing divide in the U.K.

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While the London property scene shows little signs of calming, analysts suggest that growth will remain stable, but overtaken by the South East of the U.K. in around two years' time.

"We are forecasting strong growth for London, but the South East will be the strongest performing region and we will see stronger growth outside of London," Sophie Chick, analyst in residential research at Savills, told CNBC in a phone interview.

"The affordability levels in London will be so stretched the market will start to crawl down. London will pause, we don't think prices will fall, but they will increase slower and it will be a chance for the regions to play catch up."

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