London prices soar 10pc in October
Buying frenzy prompts warning from Bank of England that market may be overextended
London house prices have surged by more than 10 per cent this month, prompting warnings from the Bank of England that it was on the alert for signs that borrowers may be overextending themselves.
The sharp jump in prices was driven by demand from overseas investors, adding pressure to a market with an already small supply of properties, according to property website Rightmove.
Values in the British capital city surged 10.2 per cent, or £50,484 (HK$631,000) to an average of £544,232, Rightmove reported.
Estate agents in inner London reported a "buying frenzy" that reduced the available stock to nearly nothing, it said. The rise - the biggest monthly jump since 2002 - took annual price growth to 13.8 per cent, more than five times the rate of inflation.
The news prompted Bank of England (BOE) official Martin Taylor to caution that policymakers were watching for signs that banks or borrowers may become over-extended as the housing market strengthens.
The central bank's Financial Policy Committee was also monitoring for "signs that borrowers were not in a position to withstand an eventual rise in interest rates, signs in general that a more speculative market might be developing", he said in a speech on Monday. "Housing boom and bust and financial stability make uneasy bedfellows," he warned.