London house prices are rising fast

In June house prices in London rose at their fastest rate for six and a half years - and by the fastest rate for four years in the South East.

A strong performance by the financial services sector has fuelled the boom.

Rics said that the gap between prices in London and the rest of England and Wales was the highest it has ever seen.

Racing ahead

A strong financial services sector has transformed London into a property-rich 'city state' Ian Perry, RICS

From 2002 to 2005, the north-south house price divide narrowed a little as northern and western parts of England and Wales enjoyed strong price growth.

But according to the Rics survey, which measures confidence levels amongst members, this situation has changed.

Now it seems the property market in the capital and South East is racing ahead while the rest of the country has taken a breather.

"Evidence suggests that the property market is once again seeing a north-south divide," said Ian Perry, Rics spokesman.

"A strong financial services sector has transformed London into a property-rich 'city state'."

Buoyant

Overall, though, despite rising unemployment, utility bills and oil prices, it seems the market is still buoyant.

Rics said 28% more chartered surveyors reported prices rising rather than falling.

In May, 21% more chartered surveyors reported prices rising rather than falling.

But the amount of property coming onto the market showed a slight drop in June.

On Monday, Oxford Economic Forecasting (OEF) predicted average house prices in England could rise from �195,000 to nearly �290,000 by 2011.

Under-supply of new housing, particularly in London and the South East, would fuel house price inflation, the OEF said.