'Boom over' as inflation outstrips house prices

Prices in six London boroughs have risen by less than inflation over the last 12 months - further evidence that the 10-year property price boom is over.

The six boroughs are Waltham Forest, Havering, Redbridge, Southwark, Greenwich and Lambeth.

Across London, the average increase in house prices was 4.2 per cent year on year, while general inflation stands at 2.2 per cent. This time last year, prices were rising at a rate of 13 per cent. Today's data, from house price monitor Hometrack,also found:

The biggest loser has been Waltham Forest, where property prices rose only 0.9 per cent in a year, to an average of £222,200.

Prices in Lambeth and Greenwich rose only 1.2 per cent - to £284,700 and £197,500 respectively

The best performer was Merton, where prices rose 7.7 per cent to £351,600. Other winners were Camden (6.5 per cent) and Hammersmith and Fulham (6.1 per cent).

The highest prices in London are in Kensington and Chelsea where the average home costs £726,400. The cheapest are in Barking and Dagenham, at £158,600.

Over the last month prices have fallen 0.2 per cent on average. No borough saw an increase.

Hometrack's director of research, Richard Donnell, said the prices were falling because of a 45 per cent reduction in the number of buyers.

But he added the trend could reverse following cuts in interest rates: "A small if growing number of buyers appear ready to dip their toes in the market again but any upward pressure on prices is likely to remain limited for the foreseeable future," he said.

Cass Business School fellow Peter Hahn said: "Mortgages have been too cheap for too long and now we are seeing the opposite: loans are harder to come by and more expensive. That means lower house prices. My advice for people is this: don't buy property now. Wait until prices come down this year."

Ed Mead, of agents Douglas & Gordon, said sellers were becoming more realistic. "Some buyers are finally accepting lower offers as they realise inflated asking prices are not achievable."

Andrew Weir, of Foxtons, said: "Prices will only go down if we experience a drop in employment or rising interest rates or inflation."