Land Registry house price data shows two-pace market

Further evidence of a two-pace housing market has been revealed as data shows prices rocketing in London but rising below inflation in some other regions.

Property prices were up by 18.5% year-on-year in London in May, but only rose by 0.9% in the North East of England and 1.3% in the North West.

On average in England and Wales, prices were up 6.7%, the Land Registry said.

That meant the typical home cost £172,035, compared with a peak of £181,572 in November 2007.

The figures come a day after the Bank of England's Financial Policy Committee (FPC) outlined measures designed to avert a housing boom that could destabilise the UK economy.

While prices rose annually by 26.3% year-on-year in May in the Waltham Forest area of London, the Land Registry data showed prices were lower than a year ago in some areas of Wales, as well as Blackburn, Knowsley and Hartlepool.

The biggest fall was a 13.2% drop in Merthyr Tydfil, although the Land Registry said there were very few transactions in the area, and this could have affected the figures.

The survey echoes figures from the Office for National Statistics (ONS) and some lenders in suggesting that prices in London and the South East of England have risen much more sharply than other areas.

The Land Registry figures for May showed that prices rose annually by 8.4% in the South East of England, 8.4% in the East of England, 6.5% in the East Midlands, 4.7% in the South West of England, 4.3% in the West Midlands, 2.9% in Yorkshire and the Humber, and 2.3% in Wales.

The data also shows that 577 properties were sold in London for more than £1m in March this year.

Many commentators have warned that action to restrict lending could affect the recovering market in some parts of the country.

"Any far reaching changes do run the risk of putting a halt to recovery in other areas of the country and nurturing that is just as big a concern as the London and South East market overheating," said Jeremy Duncombe, director at Legal & General Mortgage Club.

"The only way that we can build a sustainable and balanced housing market is by building more homes and all efforts must be made to get builders building."

On Thursday, the FPC gave details of a long-term measure to act as a "fire-break" on the housing market pushing people into unmanageable debt.

It has recommended that lenders check mortgage applicants can cope with a three percentage point rise in interest rates - slightly tougher than current affordability checks.

It has also said that, from October, there should be a 15% cap on the number of mortgages that banks and building societies can lend to people who want to borrow more than 4.5 times their salary.

Separately, the Treasury has said it will ban anyone applying for a loan through the Help to Buy scheme borrowing any more than 4.5 times their income.