Price surge sees gap between London and the rest of the UK widen

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The cost of the average home has rocketed almost £16,000 in just a year while London house prices are up 18.2 per cent, according to latest figures.

Annual house price inflation hit 9.5 per cent in March, up on 9.4 per cent in February, and the biggest annual jump since May 2010.

The gap between London and the rest of the country is now the widest in 40 years, with homes in the capital costing more than double those elsewhere.

But while fears mount that the property market is overheating, Nationwide said house prices last month saw their smallest monthly rise since June 2013.

Property rose 0.4 per cent in March, slowing from an upwardly revised 0.7 per cent increase in February.

An average home now costs £180,264, compared to £164,630 a year ago. London house price inflation was the strongest seen since 2003, widening the gap between property values in the capital and those in the rest of the UK to the largest levels on record.

The typical house price in the capital is £362,699 - which is one-fifth higher than its 2007 peak.

Nationwide chief economist Robert Gardner said: ‘There is little doubt that the recovery in the housing market is now firmly established, with activity levels picking up and house prices recording their 15th successive monthly increase in March.”

Gardner said low mortgage rates, easier credit and a brighter outlook for the economy were all boosting demand for housing although the supply of houses continues to lag far behind.

“The number of new homes being built in England is still around 40 per cent below pre-crisis levels, and this was already insufficient to keep up with the increase in the number of households being formed,” he added.