Flood of new properties gives London its best new year rally in five years

London home sellers flooded the market in January and pushed up asking prices in the biggest new-year increase since 2008, Rightmove said.

Asking prices in the capital rose 3.6 per cent from the previous month to an average £480,890 (HK$5.9 million), the property website operator said in a report on Monday. Prices rose 9.7 per cent from a year earlier, the biggest annual increase since February 2010. Nationally, prices rose 0.2 per cent.

The number of new properties hitting the London property market rose 29 per cent from a year earlier. If that becomes a trend, Rightmove said it could help to better balance supply and demand and slow house-price growth. Demand in London has boosted values and helped the city outperform the rest of the country over the past year.

The continued increase in London prices "restricts any recovery in transaction volumes that deliver the level of fluidity that a vibrant and healthy market needs", said Miles Shipside, director at Rightmove.

Still, "the rush of sellers to the market this month could be an early signal that the heady rate of price increases is set to slow down, driven by stretched buyer affordability and more stock to choose from".

Nationally, prices rose 2.4 per cent in January from a year earlier to an average £229,429, Rightmove said. Recent reports have indicated credit availability is improving as the Bank of England's Funding for Lending Scheme starts to take effect. Acadametrics said last week that home values may record a modest increase this year, though the outlook for the economy remains uncertain.

In a separate report, the Centre for Economics and Business Research forecast that UK house prices will rise 0.8 per cent this year. It also predicted that the average value will reach £223,000 in 2014, surpassing the 2007 pre-crisis peak for the first time.