Biggest house price rise in six years as London lures cash
House prices made their sharpest monthly jump in more than six years today and foreign investors hailed London the top European destination for investment.
Homes across Britain surged 2.6 per cent in value on average last month, according to the Halifax index.
It is the biggest monthly jump in house prices since October 2002, putting the average property at £158,565. The month-on-month leap echoes the 1.2 per cent May rise reported last week by another important index from Nationwide.
Today's optimism heightened speculation that house prices could soon stabilise after plummeting more than 20 per cent since their peak in 2007.
It adds to the recent run of positive data on the housing market, with the Bank of England reporting a rise in mortgage approvals for the third month in a row in April and estate agents insisting buyers were being tempted back by record low interest rates and falling prices. The Bank's Monetary Policy Committee held interest rates today at 0.5 per cent in the hope of kick-starting demand.
There were more uplifting economic indicators today as a survey suggested foreign businessmen would rather pump their cash into London than any other European city.
The capital attracted 262 foreign investment projects last year despite the financial hurricane which battered the City, according to the annual survey by accountancy firm Ernst & Young.
Mayor Boris Johnson welcomed London's retention of the number one slot for the 11th consecutive year, saying it showed the city had an "extremely bright future". He said: "A key priority of mine throughout the past year has been to shout from the rooftops at every opportunity that London is the place to invest in and to visit. Our work of selling London abroad is paying off. Our city is winning through these tough times and looking to an extremely bright future."
Scott Halliday of Ernst & Young said investors were drawn to the capital by its entrepreneurship, talent and enthusiasm for green projects.
Economists tempered the positive mood by warning it was too soon to say the housing market was turning yet. With buyers still struggling to secure mortgages and unemployment rising, some said demand for property was likely to stay low, putting a downwards pressure on house prices and leaving green shoots struggling to grow.
Howard Archer, chief UK and European economist at Global Insight, called the figures "a real eye opener" but thought prices still had a bit further to fall. Seema Shah, property economist at Capital Economics, said the rise could "be a pause for breath".
But Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, thought today's data "appeared to have more legs" than previous apparent chinks of light.
One area where the economy is barren of any turnaround signs is the car industry. New car sales fell last month to 134,858, down 24.8 per cent on May last year, the Society of Motor Manufacturers and Traders said. Sales have fallen 13 months in a row.
