Average house prices in England and Wales hit new record

Average house prices in England and Wales hit an all time high in July surpassing their previous peak of 2008 driven by strong demand in London.

The average home in the two countries now costs £232,969, which is up £5,796 on last year and £1,140 higher than the previous peak recorded in February 2008 at the height of the last housing boom, the report from LSL Property Services showed.

It added that the increase indicated long term recovery in property prices was becoming a reality thanks in part to easier lending conditions since the introduction last year of the Bank of England backed Funding for Lending scheme.

Mortgage lending was 17% higher in May than a year earlier and was up by a fifth on the previous month, while the number of first-time buyers was at its highest level since 2007, the report found.

But LSL warned the rise in property prices continued to be driven by demand in the capital where house prices were rising faster than anywhere else in the country driven by demand from both domestic and foreign buyers.

House prices were up 7.1% on the year. That compared to a rise of 2.6% across the rest of England and Wales - the biggest year-on-year rise since April - underlining the deepening divide between London and the rest of the country.

Without a sudden rush of new properties hitting the market prices will continue to rise over the coming months, LSL warned.

David Newnes, director of LSL Property Services said: "Both the lack of housing supply and rising competition in the property market are supporting prices, but at the same time making it more difficult for first-time buyers. 

"The Government urgently needs to address housing supply if it is serious about boosting home ownership levels. One way would be to remove stamp duty, which is a disincentive to buying for both home movers as well as first-time buyers."

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